CIMB Research has maintained its outperform call on Industrial Concrete Products Bhd (ICP) at RM2.98 with a target price of RM3.75, underpinned by its healthy outstanding order book and upcoming plant in Johor, which is on schedule to start by September.

The research house also expected ICP’s quarry division to be an increasingly important contributor over the next three years, with two new quarries joining its stables by end-2008.

“We continue to like ICP in view of its leading position in the local pretensioned spun concrete (PSC) piles market, potential spillover contracts and brighter overseas prospects.

“Currently, we are projecting ICP to deliver a three-year earnings per share (EPS) compound annual growth rate (CAGR) of 20%, on the back of higher selling prices for its PSC piles, along with capacity expansion plans,” it added.

As at end-Dec 2007, ICP’s order book stood at 561,000 tonnes (MT), which was equivalent to slightly more than five months’ delivery.

“Given that all its plants are running at optimum capacity and orders continue to stream in at a healthy rate, we believe the order book could have expanded further to between 800,000 and 900,000 MT in recent months,” it said.

CIMB Research added that the order book would be worth between RM240 million and RM270 million, assuming the average selling price was RM300 per tonne.

“We have raised our FY08-10 net profit forecasts by between 4% and 13%, mainly to reflect potential contributions from ICP’s upcoming Johor plant, which is expected to be ready by Sept 2008, as well as higher production volume and selling price assumptions.”

Nevertheless, it had lowered its target price for ICP to RM3.75 from RM5, due to the construction sector’s price earnings ratio, which had been sliced to 13.5 times, from 20 times.

Additionally, CIMB Research said ICP, which had been awarded piling projects for the second Penang Bridge and the electrified double tracking projects by the federal government, was expected to produce about RM250 million worth of PSC piles.

The company’s quarry business had also been improving over the past six months.

CIMB Research said: “Given the promising prospects, it is not surprising that the group is planning to set up more plants over the next few years.”