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JS Securities Limited – JS Research (October 22, 2021)

Karachi, October 22, 2021 (PPI-OT): DGKC, CHCC, FCCL Previews for 1QFY22

We present earnings estimates for DG Khan Cement Company (DGKC), Cherat Cement Company Limited (CHCC) and Fauji Cement Company Limited (FCCL) ahead of the 1QFY22 result announcements. We expect flattish margins on a QoQ basis for two out of the three companies discussed mainly due to higher coal costs.

Result Previews

DG Khan Cement Company Ltd. (DGKC): The Board of Directors of DGKC is scheduled to meet on 25th October, 2021 to discuss its 1QFY22 financial result. We expect the company to post an EPS of Rs3.49, versus a loss of Rs1.29/share during SPLY, largely on account of better retention prices. Earnings are likely to increase on a QoQ basis, primarily due to dividend income from portfolio companies (where major contributors were MCB, AICL and NML).

Cherat Cement Company Ltd. (CHCC): CHCC’s Board of Directors is scheduled to meet on 27th October, 2021. We expect the company to post an EPS of Rs5.21 for 1QFY22, versus an EPS of Rs1.59/share during 1QFY21. Gross margins are expected to show a 6ppt increase over SPLY while margins on a QoQ basis are expected to remain flat. CHCC is likely to sustain the cost pressures relative to its peers owing to the different power and fuel efficiency arrangements the company has.

Fauji Cement Company Limited (FCCL): FCCL is set to announce its 1QFY22 results on 28th October, 2021. We project 1QFY22 earnings at Rs1,060mn which translates to an EPS of Rs0.77. Earnings are expected to be 1.5x higher YoY due to higher volumetric sales (plant running at~100% utilization) and better retention prices. The company also benefits by use of Afghan coal and local coal which in turn brings its coal costs down relative to peers. However, since the company gets gas on LNG rates the cost saving impact neutralizes, hence we expect flat margins on a QoQ basis.