Karachi, September 08, 2022 (PPI-OT): CHCC: FY22 Analyst Briefing Takeaways
Cherat Cement Company Limited (CHCC) organized its analyst briefing today to apprise investors of the FY22 result and future outlook. To recall, CHCC announced the FY22 result where the company posted PAT of PkR4.5bn (EPS: PkR22.93), up 39%YoY. CHCC also posted PAT of PkR1.02bn (EPS: PkR5.2), up 4%YoY in 4QFY22 at a strong GM of 28.5% during the quarter. The company also announced a final cash dividend of Rs3.0/share in FY22.
The company’s sales in 4QFY22 stood at PkR9.5bn, up 22%YoY. Largely attributable to higher retail prices which avg. at PkR11.2K-11.4K/ton.
In FY22, local sales stood at 3.26mn tons, decreasing by 5.21%YoY but were largely offset by higher retention prices, up 42%YoY, resulting in a growth of 27%YoY in the company’s topline to PkR32.1bn in FY22. On the export front, sales stood at 0.293mn tons, down by 42.6%YoY in FY22 due to uncertainty and political unrest in Afghanistan.
Current cement prices are hovering around PkR11.6-11.8k/ton in both regions. Whereas export prices are hovering around US$55/ton or ~PkR580/bag.
On the cost side, currently, Afghan coal by north-based players is procured at PkR55-58k/ton while Mozambique coal is procured at US$170-180/ton by south-based players. The current coal mix of the company comprises of Afghan coal (90%) and local coal (10%). To note, Mozambique coal is inferior to afghan coal in terms of quality and has lower heating value.
Commenting on the power mix, the company’s current power requirement is being met by a mix of gas (40-45%), WHR (35%), Solar Power (7-10%), and the remaining 10% from the grid. Currently, the company has the full availability of natural gas while it may face a shortage of supply in the winter where it will transfer to the grid and some combination of WHR and Solar. Currently, natural gas prices stands at PkR1,100-1,200/mmbtu or PkR12-13/Kwh while PESCO tariff is at PkR30/Kwh.
Moving forward, local cement sales are expected to decline by 3-4%YoY in FY23 (where management believes the rehabilitation work on flood-affected areas will crawl back demand in 2HFY23 from the current slump) while export sales are likely to decline by 20%YoY in FY23. Moreover, the margin on export is expected to remain low given the rising cost of coal while export prices remain the same.
Commenting on the expansion plan, the management believes its upcoming Greenfield expansion with a capacity of ~8,000-9,000tons/day is likely to cost an estimated PkR36-40bn. However, the management is looking at the current situation to further asses the project’s total cost and its ideal time of COD which is expected in the next couple of years.