Learn about the list of “SCC Group” stocks that witnessed a sharp decline…is it worth accepting? With the future of business

Learn about the business of “SCC Group”

“SCC” It is a company that has been in business for 111 years, founded in 1913, and was formerly known as “Siam Cement Company Limited”, and is engaged in the production of cement. Important building materials for national development and import substitution. Later, the business expanded and continues to grow. It was listed on the stock exchange on April 25, 1975.

At present, SCC operates an investment business (holding company) in 3 main businesses, both cement and building products companies. Chemicals trading and packaging business

This is to make the business easier to understand. Divide the work into two forms The first group He is “Business groups listed on the stock exchange” Leading the Packaging Business under its operations “SCG Packaging General Company Limited or SCGP” Doing business by owning shares in other companies (holding company) whose main activity is providing integrated packaging solutions. (of which Siam Kraft Industry Company Limited is a subsidiary) is divided into three main business lines: the integrated packaging business line, and the pulp and paper business line. and recycling business line, which SCC owns the largest No. 1 stake in SCGP with 3,095,882,660 shares, representing 72.12%.

SCGP recently acquired a 70% stake (M&P) in Starprint Vietnam JSC (SPV), an Offset Folding Carton producer in Vietnam.

side “SCG Decoration Company” operated by “SCG Decor General Company Limited or SCGD” with “Thai Paper Tile Co., Ltd.” Owner of Chang'an brand building materials was established on June 30, 1938 (a subsidiary of SCC) is the No. 1 largest shareholder. A total of 1,210,897,600 shares, or 73.39%.

while “Chemical trade” operated by “SCG Chemicals General Company Limited or SCGC” A leader in chemical innovation and modern technology in integrated chemicals in ASEAN Its production base covers Vietnam, Indonesia and Thailand, and it is arguably a major petrochemical company providing products from upstream to downstream services, although SCGC is not yet listed on the stock exchange. But SCC's original plan was to spin off shares to sell in initial public offerings.

However, Suez Cement Group continues to move forward with its business. We recently collaborated with BBGI and QTC to develop and produce bioconverter oil from palm oil, which is ready for delivery.

part the second group He is “Businesses not listed on the Thai Stock Exchange” led by “SCG Cement and Green Solutions” operated by “SCG Cement Building Materials Company Limited (SCG CBM)”

any SCG CBM is the No. 1 shareholder. in “Quality Construction Products Public Company Limited or Q-CON” 244,059,800 shares, or 61.01% It also owns a majority stake in “SCG JWD Logistics Public Company Limited or SJWD”. 537,828,254 shares, equivalent to 29.70%

“SJWD” was created from the merger between “SCG Logistics Management Company Limited or SCGL” and “JWD Info Logistics Public Company Limited or JWD” by SJWD which provides integrated logistics and supply chain services within the ASEAN region. The company's services are divided into two main groups: 1. Logistics and supply services, such as warehouse management and parking management services. Transportation and distribution services (B2B, D2C, cross-border, multimodal transportation) Other logistics services and international logistics 2. Other business

In addition, there is also “SCG Smart Life Business” And “SCG Distribution and Retail Company” by “SCG Distribution” Owns the No. 1 largest stake in “Siam Global House Public Company Limited or GLOBAL” A center for selling building materials, decorative materials, tools and equipment used in building, adding and decorating homes and gardens in a combined turnover of 1,647,791,666 shares, or 32.94%.La is the second largest shareholder of SJWD stock. 238,978,047 shares, equivalent to 13.20%

SCC Investment Business Overview

Investment Business Taking care of investments in various businesses. Most of the companies in this group are joint ventures with leading overseas companies such as Kubota, Yamato Kogyo, Aisin Takaoka Group, Nippon Steel, Toyota Motor, etc. They are also looking after industrial land business along with Hemaraj Development Corporation.

Check stock list\"SCC Group\" Falling hard... deserves acceptance?  With the future of business

Re-check the future of SCC

Research Department, Asia Plus Securities He stated that SCC's business trend in the second quarter of 2024 is in terms of… “Petrochemical Trade” Increased sales volume of polyolefin plastic pellets (PE and PP) is expected to recover better from Q1 2024 after the Rayong Olefins plant resumed operations at the end of March 2024 and the vinyl business will generate more PVC sales volume. With the improvement of the tight situation of EDC raw materials, SCC's PVC plant is back in full operation again.

However, the research department believes that the petrochemicals business is still at risk of incurring further losses in the second quarter of 2024 given the situation where the spread of the main products, both HDPE-Naphtha and PP-Naphtha in April 2024, is still below $400. US/ton, taking into account cash costs (cost) for a general olefins plant, although SCC has sales of high value-added products (HVA) and the Green Polymer range of plastics, which has a higher penetration of 100% generic plastic -$150/ton sees SCC achieve positive EBITDA. But this is not enough to cover the various fixed costs. Including fixed expenses from Long Son Petrochemical Plant (LSP), which consists of depreciation and interest to be recognized at approximately 600 million baht per month.

Regarding the problem at the LSP plant, a defect was found during the operation of the entire plant in the first quarter of 2024 and is being corrected. It is expected that the entire plant will be able to resume operation around June 2024, about 3 months later than SCC's original plan, although this will result in SCC losing approximately 3,000 million baht in revenue per month. But the research team believes that this will not affect the performance of the petrochemical business. This is because at the start of operation of the LSP plant, it will produce regular grade products. Which currently has a spread below the break-even point. In addition, deferring the commercial operation of the LSP plant will result in SCC delaying the recognition of additional depreciation and interest expense of 1,000 million baht per quarter. Vacation for the second half of the year.

The research department expects that the overall picture of the petrochemical olefins business will gradually improve in the second half of 2024, with the hope that the global economy will gradually recover. In light of the trend towards lower inflation and the change in the direction of monetary policy towards monetary easing in many countries. This will gradually increase the demand for petrochemical products. In addition, new supply of olefin petrochemicals will decline significantly during 2024-2026 compared to 2020-2023, leading to a petrochemical product penetration trend that is likely to increase in the second half of 2024. This is when the LSP commercial operations.

“Cement Building Products Business (CBM)” Divided into 3 sub-businesses: 1.SCG Cement & Green Solution Business 2.SCG Smart Living Business and SCG Distribution & Retail Business 3. SCG Decoration Works (SCGD). The trend of CBM's operating results in the second quarter of 2024 is expected to be similar to the first quarter of 2024, although the second quarter of the year will usually be affected. The season has more holidays, but in 2024 it is expected that there will be more investment projects. government after approving the budget law for 2024.

Meanwhile, private investments have begun to see stimulus measures in the real estate sector, as well as markets in the ASEAN region that continue to see recovery momentum in Indonesia and Vietnam. Including Cambodia, which is beginning to show signs of recovery in the agricultural sector, which will continue to impact the demand for construction materials in the low and middle group.

Production costs There is a positive factor from the continuing decline in coal prices. In addition to the continuous increase in the percentage of use of alternative fuels (AFR) starting from the end of 2023, as the percentage of use of alternative fuels reached 40% of the total types of fuels, and rose to 47% in the first quarter of 2024, and it is targeted to increase to 50% during the year. 2024 includes investment in installing solar cells to produce electricity for personal use, which continues to increase. By the end of the first quarter of 2024, Saudi Cement Company has a solar production capacity of 263 MW, up from 229 MW at the end of 2023 and plans to increase this capacity to 400-500 MW by the end of 2024. This will play an important role in increasing margins Profit for this business group

“Packaging Works (SCGP)” In the second quarter of 2024, it is likely to slow down compared to the first quarter of 2024 due to the seasonal effect of Thailand hosting the Songkran festival as well as Indonesia having a long holiday during the Eid al-Fitr festival after Ramadan. Which will have some impact on the production sector. In addition, the fiber chain work will be closed for maintenance at the Phoenix Pulp and Paper plant in Khon Kaen which has been postponed from the first quarter of 2024 for two weeks, and it is expected that there will be approximately 100 million Baht in expenses Baht

Although the research department still believes that the petrochemical business has crossed its lowest level since 2023, new supply from the petrochemical olefins business will decline significantly over the next three years (2024-2026) compared to the past five years. The time period took It takes longer for the petrochemical business to emerge from the downturn than the research team expected. This is due to the slow recovery of the Chinese economy. There is also a short-term pressure factor in terms of costs as the price of naphtha rises in line with crude oil prices due to geopolitical issues. As a result, the petrochemicals business is likely to continue to incur losses for another quarter or two, prompting the research department to consider lowering its earnings forecasts for 2024-2025 by 31% and 18% respectively, and it is expected that in 2024 SCC will achieve a net profit of 17,131 million baht, a decrease of 34% year-on-year, and in 2025, net profit is expected to reach 27,040 million baht, an increase of 58% year-on-year from the low base in 2024.

Regular earnings recovered longer than expected.

while Analysis of Dow Securities (Thailand). Maintain the “Hold” recommendation at the new 2024E target price of 250 baht (previously 270 baht) based on the SOTP method. The analyst has a more negative view on the company's normalized earnings outlook. Currently, the analyst team believes that the profitability of the petrochemicals business will continue to come under pressure due to olefins spreads remaining low in the second half of 2024, reflecting a slower recovery in demand for plastic products that the analyst department had earlier forecast. Moreover, the new supply tends to increase HoH for cement and building products business. The analyst believes we will still see weak year-on-year revenues in the second quarter of 2024, while political uncertainty may delay government spending.

The analysis department expects that the LSP petrochemical complex project will still be able to commence commercial operations (COD) during the second half of 2024 (the company is targeting August 2025). 2026 fell 16% to 20.1 billion baht, mainly due to weak 1Q2024 results, lower olefins spread assumptions and lower revenues from its cement and construction business segments SET's share price underperformed -18% over the past six months. , reflecting the stabilization trend of lower olefin spread and the previous announcement of postponing the commercial operation of the LSP petrochemical complex project. The current price reflects a volumetric value of the 2024 NPV of 0.69 times (about -2.6SD less than the average NPV of the past five years).

Although the valuation is not expensive, the analyst believes that SCC stock lacks short-term drivers and expects the olefins spread to gradually recover in the second half of the year following the recovery of the Chinese economy. However, the analyst believes that the company will be able to commercially operate the complex project. LSP Petrochemicals saw a rise in petrochemical sales volume

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