Karachi, March 13, 2023 (PPI-OT): MLCF: Timely expansion and evergreen margins

MLCF is the pioneer in capacity expansion in the ongoing expansion cycle, with the company having commissioned an expansion of 2.2mn tons in Nov’22. This would take MLCF to become the 4th largest cement factory in terms of capacity with a total capacity of 7.9mn tons per annum.

MLCF posted healthy margins in the last financial result, posting at 29.4% (vs. avg 25.2% of AKD Universe). This is owing to use of low cost coal (Local and Afghan coal) in the mix and reliance on cheap power sources.

Company has manageable debt on its book as compared to its peers (D/E: 0.47 and D/A: 0.25), Of this, the subsidized loans (under LTFF and TERF) make up ~28.4% of the total outstanding debt for the company.

We have a “Buy” rating on the stock, with Dec’23 TP of PkR34/sh, offering an potential upside of 32.1% from the stock’s last close. In addition, the stock provides dividend yield of 6.8% in FY24.