3QFY17 profit off 16% y‐y: SCC slightly undershot forecasts with a 16% y‐y drop in 3QFY17 profit. For the period, the quarterly profit came in at Bt11.8bn, a bit shy of our forecast of Bt12bn. A weak showing from chemicals business was the main culprit behind its lacklustre performance in this period. Narrowing margins took a bite out of profit at chemicals business as growing supply put a damper on product prices. On the other hand, profit from cement/building materials business rose slightly as growing revenue driven by its expansion drive in ASEAN offset margin pressure. Profit from packaging business also edged modestly higher on the back of its regional expansion in ASEAN.

Downward profit trend likely to continue into 4QFY17: Management has guided that chemicals business will remain in a soft patch in 4QFY17 amid persistent pressure from new supply. Cement/building materials business should see profit drop as low seasonality in 4Q offsets a nascent increase in construction of the government’s infrastructure projects while packaging business is likely to hold steady. On this basis, we believe SCC should see its downward profit trend continue into 4QFY17 as 4Q is traditionally a low season.

Short‐term bearish but long‐term bullish: We have a short‐term bearish view of SCC amid a dearth of catalysts but its long‐term bullish outlook remains intact on expectations that cement/building materials business will be on the mend next year, helped by a pickup in construction activity for both public and private projects and chemicals business next year will be better than this year, helped by lower supply and improving demand on the prospects of better global economic growth. At the end of the day, we maintain a ‘BUY’ call on SCC shares with a FY18 target price of Bt550/share.