JS Securities Limited – JS Research (October 21, 2021)

Karachi, October 21, 2021 (PPI-OT): KOHC, MLCF and ACPL: Margins to take a hit in 1QFY22E

We present earnings estimates for Kohat Cement Company Limited (KOHC), Maple Leaf Cement Factory Ltd. (MLCF) and Attock Cement Pakistan Limited (ACPL) ahead of the 1QFY22 result announcements. We expect a dip in margins on a QoQ basis for the companies as a result of higher coal costs and lower volumetric sales.

Result Previews

Kohat Cement Company Limited (KOHC): KOHC is projected to post earnings of Rs912mn which translates to an EPS of Rs4.54 for 1QFY22, an 80% YoY increase primarily led by higher retention prices. On the other hand, earnings on a QoQ basis are expected be lower, mainly due to depressed gross level performance (a 3ppt QoQ decline) where the main culprits were higher coal prices and inability to timely pass on the coal price hike’s impact to end consumer.

Maple Leaf Cement Factory Ltd. (MLCF): We expect the company to post stand-alone EPS of Rs0.56 for the quarter, versus the reported earnings of Rs309mn (EPS: Rs0.28) for 1QFY21. Though prices in the local market increased during the period but the same was offset by higher coal prices and rupee devaluation, hence we expect a 1.1ppt dip in gross margins on a QoQ basis. We forecast MLCF’s consolidated 1QFY22 EPS to clock in at ~Rs0.65.

Attock Cement Pakistan Limited (ACPL): ACPL’s Board is scheduled to meet on 21st October, 2021 to discuss its 1QFY22 financial result. We project the company to post a loss of Rs28mn in 1QFY22 which translates to an LPS of Rs0.21. We project a 3ppt QoQ decline in gross margins in 1QFY22 where the main culprits have been slowed demand (a 29% QoQ decrease in volumetric sales) and higher input prices. To recall, during the quarter ACPL shut its inefficient Line-1 due to demand slow down. Moreover, exports, which are a major chunk of ACPL’s sales (~37% of dispatches in 1QFY22); currently earn a negative contribution margin for the company.

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