InnovestX Securities has shifted to a more positive outlook on Siam Cement Group (SET: SCC), upgrading its recommendation from ‘Neutral’ to ‘Outperform’ with an end-2026 target price of Bt229. The upgrade is underpinned by a sharp increase in chemical spreads, which more than compensates for the temporary shutdown at Rayong Olefins Complex (ROC).
SCC’s chemical arm, SCG Chemicals (SCGC), temporarily halted operations at ROC in early March due to feedstock disruptions, resulting in fixed costs of Bt150 million per month. However, recent geopolitical tensions, notably the US-Iran conflict, have led to a spike in downstream polyethylene (PE) and polypropylene (PP) prices. The spread for high-density polyethylene (HDPE) surged to US$500/ton, up from US$300/ton pre-conflict—more than offsetting the shutdown costs and turning the situation into a net positive for SCC.
Further supporting operations, SCC secured three additional feedstock vessels, extending the operating life of its Map Ta Phut Olefins Complex (MOC) and Long Son Petrochemicals (LSP) in Vietnam until at least the end of April, with ongoing negotiations for additional supply post-April.
Management anticipates global ethylene/propylene markets will reach supply-demand equilibrium faster than initially projected, thanks to recent attacks on refining and petrochemical infrastructure in the Middle East. SCC’s LSP facility in Vietnam is on track to become a top-quartile, low-cost producer after commissioning an ethane-based project by late 2027, allowing for significantly cheaper ethane feedstock. The US$500 million investment is expected to add Bt6-7 billion to annual earnings from 2028.
SCC is maintaining its EBITDA target above Bt60 billion for 2026 (up from Bt55 billion in 2025), supported by annual cost savings of Bt4.3 billion from asset divestitures and higher chemical spreads. The group is also mitigating risks from rising energy costs by using alternative fuels for over half of its total consumption and keeping capital expenditure low at Bt30 billion, which should aid in debt reduction and dividend payments.
Despite a 19% fall in SCC’s share price since the onset of the US-Iran war—already pricing in much of the negative impact—InnovestX believes the upside from improved spreads and new feedstock arrangements supports a bullish stance. The target price remains Bt229, based on a sum-of-the-parts methodology. Key risks to watch include volatility in raw material costs, higher interest rates, currency fluctuations, and possible oversupply in the cement and chemical segments.
