IGI Securities Limited – Day Break

Karachi, September 14, 2018 (PPI-OT): Cements – Fauji Cement Company Limited – FCCL: Rehabilitation of production line II and hefty tax reversals boost earnings by +31%YoY to PKR 2.49/share

Fauji Cement Company Limited (FCCL) registered a remarkable increase of+31%YoY in earning to PKR 3.43bn (EPS: PKR 2.49) in FY18.

The rehabilitation of production line II has had a profound impact on FY18 profitability, reducing cost of sales by a significant 14%YoY in a period which was severely marred by continued uplift in global Coal and FO prices.

Reduction in deferred tax liability (income), largely due to gradual reduction in corporate tax rates as prescribed by Finance Act 2018-19, has led to earnings accretion worth PKR 681mn (PKR 0.49/share).

We maintain a ‘BUY’ call on the scrip with a Dec-18 based target price of PKR 28.3/share, offering a +15% upside from its last close. The Company is currently trading at FY19 P/E of 7.65x and offers a healthy dividend yield of 10.2%, the highest amongst our coverage companies.