• FY23 net profit was 6% higher than our expectations. Net profit rose 56.2% YoY, lifted by higher ASP (we estimate +5%) and volume gain (+5%). Growth accelerated in 2H. 2H23 revenue gained 15% HoH, and net profit was +30%.
• Construction output in 2023 reached S$34.8bn, the highest since 2016. BCA projects output to be at S$34bn-37bn in 2024, driven by higher prices for materials and manpower. RMC volume could rise marginally to 12mn-13mn cum (average +1.6% YoY). Higher prices and higher sales of higher-margined products could sustain gross margin at 20%. The risk of customer default was reduced with about 60% of demand from public infrastructure projects, and the two integrated resorts.
• We maintain FY24e net profit estimates and a BUY recommendation. Our DCF-derived TP is raised to S$0.55 (prev. S$0.50) to reflect the strong cash flow. It increased FY23 dividend to 2.3 cents (FY22: 1.8 cents), delivering annual yield of 5.6%.

Positives

+ Achieved higher average selling price of +5% (our estimate), versus sector average of +1%., as it sold more higher-margined ready-mixed concrete products.

+ Gross margin strengthened further to 20.8% (+1.9% point YoY). We think the higher gross margin can be maintained, as low-carbon concrete products could gain wider acceptance, as a means to offset the higher carbon tax. In addition, demand for batching services, from which PanU earns a fee, is likely to be sustained. HDB has committed to launch 20,000 to 23,000 units per year through 2025.

+ ROE improved to 16.5% (FY22: 11.0%) despite net cash of S$43mn on its balance sheet. It generated FFO/share of 9.1 cents. We expect net cash to reach S$58mn at end-2024, even with higher projected capex of S$40mn to construct a new batching plant.

Negative

Nil