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JS Securities Limited – JS Research(07-10-2021)

Karachi, October 07, 2021 (PPI-OT): KOHC: Corporate briefing session key takeaways

Kohat Cement Company Limited (KOHC) held its corporate briefing session yesterday to discuss FY21 results and the outlook of the company. We present key takeaways from the session.

Kohat Cement Company Limited (KOHC) announced its FY21 result on 31st August, 2021 wherein the company posted earnings of Rs3.5bn translating into an EPS of Rs17.41 (compared to a loss per share of Rs2.21 in FY20) Primary reason for the increase in company’s profitability was better gross level performance due to higher retention prices, better volumetric sales and cost efficiencies.

KOHC’s current coal inventory costs ~US$170/ton and may last for 1.5-2 months. Out of its coal mix, 30% comprises of local coal (costing Rs22k/ton) and Afghan coal (costing Rs30k/ton). Average coal cost for 1QFY22 is US$105-110/ton.

Management apprised about its Greenfield cement expansion in Khushab including a 12MW WHR plant and 25MW coal fired plant. The company missed to take advantage of the TERF facility but is trying to avail an LTFF of up to Rs5bn. Management expects the plant to come online in 2.5 years.

The management believes that cement dispatch growth will be in the range of 6-7% during the ongoing fiscal year.

Current retention prices are around Rs8,500/ton whereas retention prices for 1QFY22 were ~Rs7,800/ton. The management expects further price hikes from here onward however expects cost hikes may outpace, denting margins in the coming quarters.

KOHC is meeting 70% of its power requirements from the National Grid whereas remaining 30% is being met through two WHR plants as the present scenario makes Furnace Oil an expensive energy source for the company. The current rate of grid electricity is ~Rs20/Kwh.

KOHC has real estate investments comprising of three properties, two in Lahore and one in Multan. Company plans to hold the investments for capital appreciation.