KUALA LUMPUR (March 8): CIMB IB Research has maintained its “Reduce” rating on Lafarge Malaysia Bhd at RM2.35 with an unchanged target price of RM1.76 and said Lafarge laid-out a challenging outlook for 2019.

In a note March 7, the research house said cost control is imperative.

“The group foresees unlikely recovery in domestic cement demand and prices in FY19F due to the downturn in jobs and an oversupplied market.

“It plans to rationalise its opex in FY19F to be in line with the industry. Fewer unscheduled plant shutdowns is paramount to contain its variable costs and increase output. It aims to be operating cash flow neutral (FY18: -RM185.2 million net operating cashflow) to strengthen its balance sheet; net gearing rose to 30% as at end-FY18,” it said.

CIMB Research said Lafarge forecasts local cement demand to contract 2.6% year-on-year in 2019 to 17.1 million MT.

“The stock's 17.5% surge today lacks fundamental justification, in our view, and has more than priced in potential positives from ECRL. Retain Reduce,” it said.