Hume Cement Industries Bhd has done amazingly well with its share price surging 156.8% in the past year to close at RM2.44 on Jan 5. The bullishness on the counter probably stems from investors who believe the cement players will get stronger. As it is, cement prices have been increasing for 6 months in a row from October 2022 to April 2023.

Besides higher selling prices of cement, the manufacturers benefit from plunging coal prices, which is one of the biggest cost components for cement players. In addition, the demand for cement will likely pickup when mega projects like MRT3, RTS and Penang Transport Master Plan commence.

On the other hand, there are concerns that the stock has already surged substantially and may see limited upside. But judging from its financial results, Hume Cement is cementing its growth further.

The company posted its highest quarterly earnings since 3QFY2003, thanks to the revision in cement selling price to offset the higher energy costs, coupled with higher sales volume amid recovery of construction activities.

Hume Cement return to the black with a net profit of RM48.33 million for the first quarter ended Sept 30, 2023 (1QFY2024) from a net loss of RM12.04 million a year ago. Revenue grew 48.3% to RM306.66 million in 1QFY2024 from RM206.79 million a year earlier. The company also declared its first dividend payout since FY2017, with an interim dividend of two sen each.

Hume Cement, which is 68.5%-controlled by billionaire Tan Sri Quek Leng Chan of the Hong Leong Group, said the construction sector is expected to continue its growth, and demand for cement will benefit from the increased development expenditures in Budget 2024.

Hume Cement is also likely to benefit from strong demand for cement in the near future, especially in Sarawak.

Sarawak Premier Tan Sri Abang Johari Tun Openg reportedly said demand for cement in Sarawak has surged on the back of a total of 960 projects with a combined value of RM46 billion that have been allocated under the state’s infrastructure development.

These infrastructure projects, which are in various stages of completion, include the Pan Borneo Highway, Sarawak’s Second Trunk Road and Coastal Road, Sarawak-Sabah Link Road, Trans Borneo Highway and those undertaken by Integrated Regional Samarahan Development Agency, Regional Corridor Development Authority and Projek Rakyat.

Understandably, Hume Cement share price has gone up so much that investors may find it quite risky to take some position now. However, given the attractive landscape in the infrastructure, property and construction sectors, cement players are one of main beneficiaries once these sectors go on full steam.

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Here are the setup based on Daily Chart:

1. Pullback setup spotted with prce moving along with 20MA
2. No weakness signal so far but another round of pullback