[Click eStock] "Ssangyong C&E, Cement Price Increase... Will Reduce Cost of Sales Burden"

Korea Investment & Securities Report

[Asia Economy Reporter Minji Lee] Korea Investment & Securities forecasted on the 5th that although there is a possibility of a downward adjustment in the cement price increase for Ssangyong C&E, this price increase notification will act as a positive factor for the stock price as the burden of cost of sales is increasing.

Ssangyong C&E notified its customers that it will raise the announced cement selling price to 93,000 KRW per ton. Considering that this is the first increase in seven years since 2014, this price increase notification is analyzed as an event that exceeds market expectations.

This increase is not a decision made by all cement companies and association members collectively, but an individual price increase notification by Ssangyong C&E. When one cement company notifies its customer, a ready-mixed concrete company, of a price increase in the announced price, other cement companies decide whether to join the price increase notification based on their individual circumstances.

According to the Ready-Mixed Concrete Industry Association, as of the end of December 2020, there are 940 ready-mixed concrete companies nationwide. If the number of price increase notifications from cement companies increases, the association, which consists of these 940 companies, will participate in negotiations, and with the participation of construction companies, one of the parties to the agreement, the final decision on whether and how much to increase the price is expected to be made.

Researcher Kyungtae Kang of Korea Investment & Securities said, “Although it is difficult to reflect the price increase in estimated earnings due to the high possibility of downward adjustment depending on the negotiation results, the price increase notification is interpreted as an event that exceeds market expectations,” and analyzed, “In the situation where the burden of cost of sales is increasing due to the rise in the price of thermal coal in the fourth quarter, this is a positive factor for the stock price.”