TA SECURITIES MAINTAINS ‘HOLD’ CALL ON CHIN HIN

Research house leaves company’s target price unchanged at 79 sen

ADDITIONAL earnings contribution from Chin Hin Group Bhd’s new Autoclaved Aerated Concrete (AAC) plant in Kota Tinggi, Johor is expected to provide some cushion to the potential drop in group earnings, said TA Securities.

“We expect the group to be able to ramp up its production in the first half of next year once it fully optimises the manufacturing processes.

“Assuming the new AAC plant can run up to 75 per cent utilisation rate in financial year 2019, we expect the division to contribute an additional RM12.5 million of profit-before-tax to the group,” it said in a note.

TA Securities said the new AAC plant commenced operation on July 18, and added 600,000 cubic metres of new capacity to the existing production capacity of 435,000 cubic metres, bringing the group’s total AAC output capacity to 1.03 million cubic metres.

“This enables Chin Hin to further strengthen its dominant position in manufacturing of AAC products in Malaysia,” it said.

TA Securities said the core products manufactured at the new plant are mainly AAC blocks, lintels and wall panels.

The main raw materials used to manufacture AAC products are cement, sand, lime, gypsum, and aluminium.

The group has invested about RM120 million which included land acquisition cost. Machineries are mainly sourced from Germany.

It said the current plant utilisation rate is 25 per cent with workforce of 150 staff members.

“We expect the group to be able to ramp up its production in the first half of next year once it fully optimises the manufacturing processes,” it said. TA Securities has maintained its “hold” call on Chin Hin with an unchanged target price of 79 sen.