[Click eStock] "Ssangyong C&E, Increasing Cost Burden... Urgent Need for Cement Price Hike"

[Asia Economy Reporter Park Jihwan] NH Investment & Securities evaluated on the 29th that Ssangyong C&E is in a situation where a cement price increase is urgently needed due to the growing burden of rising costs. They maintained a 'Buy' investment rating and a target price of 10,000 KRW.

Lee Minjae, a researcher at NH Investment & Securities, said, "Next year, difficulties are expected to continue across the cement industry due to the rise in the price of thermal coal," adding, "Despite the expansion of investment in recycled resource processing facilities, the unit cost of thermal coal input has more than doubled, making a cement price increase urgently necessary."

He emphasized, "On a consolidated basis, fourth-quarter sales are expected to be 456.3 billion KRW, operating profit 85.3 billion KRW, representing increases of 7.1% and 14.1% respectively compared to the previous year, due to the effects of previously signed thermal coal option contracts." The dividend yield for this year is around 5.6%.

Ultimately, the analysis concludes that what is needed is a cement price increase. Although the industry as a whole, including Ssangyong C&E, has expanded investment in recycled resource processing facilities, it is insufficient to offset the cost burden caused by rising thermal coal prices. Even with proactive recycled resource processing facilities reducing the thermal coal input ratio by 10%, the input cost per ton of thermal coal for cement increased by more than 8,000 KRW. Researcher Lee Minjae stated, "In addition, cost burden factors such as continuous increases in freight rates and electricity charges are rising," emphasizing, "Ultimately, only the normalization of cement prices can reduce the overall increased cost burden."

It is explained that difficulties will continue across the industry due to the rise in thermal coal prices. Based on a 12-month moving total, domestic housing starts reached 595,000 units by October this year, an increase of 67,000 units compared to the previous year. Domestic cement shipments next year are expected to exceed 50 million tons, increasing by more than 1 million tons compared to 2021. The researcher said, "Generally, 1,000 tons of thermal coal are required to produce one ton of cement," adding, "Due to the recent rise in thermal coal prices, the input cost per ton of thermal coal has more than doubled since the second half of this year," and stated, "Overall, cement companies will inevitably face a deterioration in cost ratios."

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