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AKD Daily

11 April 2017

 

FCCL: Down, but not out

 

FCCL is scheduled to announce its 3QFY17 result on Apr 17'17 where it is expected to post earnings of PkR721mn (EPS: PkR0.52), down 54%YoY. Expected decline in earnings is attributable to lower margin on costly clinker procurement as the existing Line-II (2.27mn tpa capacity; 66% of total 3.43mn tpa capacity) is undergoing repairs. While revenue is expected to rise by 6%YoY to PkR5.58bn in 3QFY17 (4.8%YoY growth in cement dispatches), higher cost of production due to relatively expensive clinker is expected to raise COGS by 58%YoY to PkR4.32bn in 3QFY17F, significantly reducing Gross Margin by 25.1ppts YoY to 22.6% during the period. However, we expect earnings to normalize in FY18F to PkR4.25/sh, as rehabilitation work on Line-II is underway and expected to be finalized in 1QFY18. Moreover, another WHR of 7.63MW for Line-I is expected to come online during the latter part of FY18 estimated to fulfill ~17% of the company's electricity requirement and contribute after tax operational savings of PkR0.22/sh annually with improvement of around 1.8ppts in GM. Currently the stock trades at an attractive FY18F PE of 9.8x, reflecting 19% discount to AKD Cement Universe's FY18F PE of 12.1x. Additionally the stock offers attractive FY18F dividend yield of 8.5%. Our Dec'17 TP of PkR56/share offers 34% upside from current price level. BUY.

 

Downturn in earnings to continue in 3QFY17: In continuation of lower earnings trend, FCCL is expected to post earnings of PkR721mn (EPS: PkR0.52), down 54%YoY in 3QFY17F. Expected decline in earnings is attributable to lower margin on costly clinker procurement as the existing Line-II (2.27mn tpa capacity; 66% of total 3.43mn tpa capacity) is undergoing repairs. While revenue is expected to rise by 6%YoY to PkR5.58bn in 3QFY17F (4.8YoY growth in cement dispatches), higher cost of production due to relatively expensive clinker is expected to raise COGS by 58%YoY to PkR4.32bn in 3QFY17, reducing GM by 25.1ppts YoY to 22.6% during the period. OPEX is expected to fall by 52%YoY to PkR77mn in 3QFY17F due to depressed pre-tax earnings (down 53%YoY). This is expected to take 9MFY17F earnings to PkR2.02bn (EPS: PkR1.47), down 54%YoY as GM is expected to remain depressed due to lower margin on expensive clinker.

 

Earnings revival from FY18 along with another WHR of 7.63MW: Being the company's top priority, rehabilitation work on Line-II is underway and expected to be fully operational by 1QFY18. In this regard, with the restoration of Line-II we expect FCCL earnings to normalize to PkR4.25/sh in FY18F. Moreover, the company has recently approved construction of another Waste Heat Recovery (WHR) Power Project with gross output of 7.63MW on Line-I which is expected to come online during the latter part of FY18. In this regard, we estimate WHR to fulfill ~17% of the company's power requirement and contribute after tax operational savings of PkR0.22/sh annually with GM improvement of around 1.8ppts.

 

Investment Perspective: Post an earnings dip in FY17F (EPS to go down by 48%YoY to PkR2.03), we expect FCCL to resume its growth trajectory going forward (FY17F-FY20F earnings CAGR of 41%). In this regard, the stock trades at a significant discount to the AKD cement space based on FY18F earnings (FCCL's FY18F PE: 9.8x vs. AKD Cement Universe PE: 12.1x). Given FCCL's strong payout profile (~90% between FY13-15), we believe the continuation of its dividend policy will likely result in attractive FY17F/FY18F yield of 2.5%/8.5%. As such, our DCF based Dec'17 TP of PkR56/share offers 34% upside. BUY!

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Wednesday, 12 April 2017

 

By: Taurus Securities Limited

 

The Board of Directors’ meeting of Fauji Cement Company Limited (FCCL) is scheduled on 17th Apr’17 to declare its 9MFY17 financial results, wherein the company is expected to record net earnings of PKR2.05bn (EPS: PKR1.49), a decline of 52% as compared to PKR4.24bn (EPS: PKR3.07) posted in SPLY. Despite an increase in the top-line amid 5% YoY volumetric growth (+14% YoY in locals, -57% YoY in exports), gross margins are expected to decline by huge 24ppts to 23% vs. 47% owing to costly clinker procurement from other cement producers.

 

On sequential basis, company’s net earnings are expected to decline by 6% QoQ to PKR700mn (EPS: PKR0.51) against PKR745mn (EPS: PKR0.54) recorded in the previous quarter on the back of lower volumes (down by 2% QoQ).

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FCCL: 3QFY17E EPS to clock-in at Rs0.56 (-50% YoY)

 

Thursday, 13 April 2017

 

By: JS Global Capital Limited

 

Fauji Cement Company (FCCL) is scheduled to announce its 3QFY17 earnings on April 17, 2017 wherein we expect the company to post EPS of Rs0.56 (-50%/+11% YoY/QoQ).

Cumulatively, our forecasts translate into 9MFY17 EPS of Rs1.50 (-52% YoY). We attribute decline in earnings to expensive clinker purchases from other manufacturers.

FCCL has historically remained slow in terms of jumping the expansion bandwagon. We highlight that company risks losing market share if it does not expand.

That said, we do not rule out the possibility of expansion announcement given strong group profile and balance sheet once rehabilitation work on Line-2 is completed.

Our Dec-17 TP of 54 remains intact for the company, reflecting upside of 24.0% from current levels. The stock currently trades at FY17E/FY18F P/E of 18.21/9.93x. ‘Buy’ maintained.

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FCCL: Higher cost of sales to curb 3QFY17 EPS

 

Thursday, 13 April 2017

 

By: Ismail Iqbal Securities (Pvt.) Limited

 

Fauji Cement Company Limited (FCCL) is scheduled to announce its third quarter earnings on April 17, 2017. We expect the company’s earnings to decrease by 54% YoY to stand at PKR 715 million (EPS: PKR 0.52). Like 2QFY17, we expect the company to not announce any dividend in 3QFY17 as well, because of low earnings. To recall, FCCL’s earnings have been under pressure since the accident at its plant last year, which has led to only line 1 with the capacity of 1.1 million MT remaining operational. As a consequence, the company has been purchasing clinker from other cement manufacturers, which is more expensive than internally produced clinker. Our December 2017 target price of PKR 47 implies a 10% upside to FCCL’s last closing price; hence we are maintaining our positive stance on the stock.

 

We expect the company’s topline to grow by 15% YoY in 3QFY17 on account of higher local dispatches. As per the provisional cement dispatches data, the overall dispatches of the company for 3QFY17 increased by 16.3% YoY taking the company’s capacity utilization to 90.2% during the quarter. Local dispatches of the company saw a massive growth of 16.2%, whereas exports fell by 80.3% YoY due to reduced demand from Afghanistan.

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Elixir Insight

 

Result Preview

FCCL: 1QFY17 EPS expected at PKR 0.55/sh, down -48%YoY: The Board of Directors of Fauji Cement Company limited (FCCL) is scheduled to announce 3QFY17 result on 17th April 2017 where we expect the company to report NPAT of PKR 760mn (EPS PKR 0.55/share) vs. PKR 1.5bn (EPS PKR 1.13/share). Despite 5%YoY growth in total dispatches (Local dispatches / Export dispatches: +16%YoY/-80%Yo Y), earnings are expected to recede primarily on account of substantial attrition in gross margin by -22.8ppts YoY to ~25%. Decline in gross margins is primarily attributable to i) expensive buying of ~0.4mnT clinkers from various cement manufacturers which accounts for ~53% of total sales and ii) absence operational savings owing to unavailability of 12MW WHRPP during the period. Other income is also estimated to decline by 47%YoY due to substantial drop in Cash and STIs, while effective tax rate will likely normalise to 31%. On cumulative basis, the company is expected to clock in 9MFY17 EPS at PKR1.49/share; down by massive 63%YoY. Our Jun-17 PT of PKR 52/sh offers an upside of 23% to last closing along with a dividend yield of 6.5%. BUY!

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FCCL: Profitability to drop by 8% QoQ to PKR 641mn

 

Friday, 14 April 2017

 

By: Arif Habib Limited

 

The Board of Directors of Fauji Cement Company Limited (FCCL) is scheduled to meet on April 17, 2017 to approve financial results for 3QFY17. We expect the company to earn profit after tax (PAT) of 641mn (EPS: PKR 0.46) in 3QFY17 resulting in cumulative PAT of 1,944mn (EPS: PKR 1.40) in 9MFY17, a decrease of 8% QoQ and 55% YoY. The quarterly decline is mainly due to 7% QoQ decline in cement dispatches to 774k tons in 3QFY17. Moreover, massive decline on 9MFY17 is attributable to lower margins amid closure of line-II. We view that company will commence operation on line-II from Jun-17, which will lead towards normalization of margins and production going forward.

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FCCL expected to post PAT of Rs 1.97bn (EPS: Rs 1.43)

 

Friday, 14 April 2017

 

By: Azee Securities (Pvt.) Ltd.

Fauji Cement is expected to post after tax earning of Rs 1.97 billion (EPS: Rs 1.43) for the 9MFY17 against Rs 4.33 billion (EPS: Rs 3.14) in same period last year, decline of 54% mainly due to due to lower margin on account of company is purchasing clinker from third party. Net sales of the company is expected to surge by 3% at Rs 15.62 billion in 9MFY17 against Rs 15.19 billion during 9MFY16 on account of swell in cement prices and higher volumes. We expect volumetric sales to up 5% to 2.22 million tons versus 2.11 million tons in 9MFY16 mainly driven by higher local sales by 14% to 2.10 million tons while exports decline by 57% YoY to 116k tons in 9MFY16. Gross profit likely to fall by 51% to Rs 3.48 billion versus Rs 7.08 billion in 9MFY16 due to higher coal prices and increase cost of production. In the same way, gross margin is expected to down to 22.3% in 9MFY17 against 46.6% in 9MFY16.

We expect company to post gigantic growth of 82% YoY to Rs 4.31 billion for the 9MFY17, translating into an EPS (earning per share) of Rs 52.03 as against Rs 2.37 billion (EPS: Rs 28.65) recorded in 9MFY16 on account of inventory gains of around Rs 1.1 billion against previous year same period of inventory losses. Net sales is expected to surge by 13% to Rs 95.18 billion versus Rs 84.31 billion in 9MFY16 due to higher volumetric sales and hike in petroleum product prices. Volumetric sales increase by 9% at 1.47 million tons versus 1.35 million tons in 9MFY16 on account of 39% surge in Mogas volumes to 415k tons in 9MFY17 against 298k

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FCCL: Earnings down by 57%YoY to PKR 0.48/share in 3QFY17

 

  • Profitability for Fauji Cement Company Ltd (FCCL) plunged by 57%YoY to PKR 669mn (EPS PKR 0.48) in 3QFY17, taking 9MFY17 profitability to PKR 1.97bn (EPS PKR 1.43), down by 55%YoY. This is mainly on account of disruptions in line II.
  • Revenue increased marginally by +6%YoY to PKR 5.57bn in 3QFY17, taking 9MFY17 revenue to PKR 15.76bn on the back of +5%YoY/-80%YoY growth anticipated in domestic/export dispatches.
  • Gross margin plunged down by 27%YoY/1.41%QoQ in 3QFY17 due to high cost of clinker procurement and higher coal & FO prices.
  • Other income contracted by 62%YoY to PKR 31mn while other expenses declined by 56%YoY to PKR 72mn in 3QFY17.

Recommendation

 

We recommend “BUY” call on the scrip with Dec-17 TP of PKR 51/share, offering upside of +22% from last closing.

 

IGI Research

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Aba Ali Habib Research

09 August 2017

 

FCCL: On the cusp of turnaround; Initiate with ‘BUY’ recommendation.

  • We initiate our coverage on Fauji Cement Company Limited (FCCL) with a ‘BUY’ recommendation based on our Jun’18 TP of PKR 50.64/share, implying a potential upside of 26.4% along with a dividend yield of 9.4%.
  • We estimate FY17 EPS to clock in at PKR 1.81, down by 53% YoY mainly due to shrinking gross margins on the back of higher cost of inventory purchased. Going forward, we expect earnings to grow at a CAGR of 9.0% during FY18-20.
  • We expect gross margins to recover due to restoration of line-2 during 1QFY18. We estimate FY18 margins to expand to 42.5%, up by 20.8pp YoY. Moreover, we believe commencement of 9MW WHR-2 during 1HFY19 would result in substantial reduction in power cost by 9% YoY from PKR 576/ton in FY18 to PKR 523/ton during FY19, thus leading to further accretion in gross margins to 43.5%.
  • FCCL is currently trading at FY18 P/E and EV/ton of 8.1x and USD 153 as against the industry average P/E and EV/ton of 10x and USD 160. EPS and DPS of the company is likely to clock in at PKR 4.94/3.75 and 4.98/4.25 during 18/19 respectively.
  • Key risk to our valuation includes:
    1. delay in commencement of Silo line-2 and WHR-II
    2. increase in international coal prices.

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Aba Ali Habib Researc

20 September 2017

 

FCCL: Result Review: FY17 EPS clock in at PKR 1.89, in line with our expectations

  • FCCL declared its FY17 financial results where company posted EPS of PKR 1.89 (in line with our expectations of PKR 1.81), down by 53% YoY primarily due to dip in margins by 24pps YoY to 21.7% in FY17. Fall in margins could be attributable to higher cost of clinker purchased.
  • 4QFY17 EPS clocked in at PKR 0.46 as against EPS of PKR 0.75 in SPLY, dip by 38% YoY mainly due to lower margins coupled with fall in cement dispatches by ~15.4% YoY.
  • FY17 Finance cost plunged by 70% YoY to PKR 152mn and effective tax rate increased to 33.5% against 31.4% in SPLY.
  • During period under review, other income declined by 49% YoY to PKR 136mn However, Company received the remaining insurance claim of PKR 305mn against its Silo line-II. FCCL declared its final cash dividend of PKR 0.90
  • We have kept our cement universe under review due to apprehension in per bag prices. Similarly, Updated industry report would be released shortly.

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AHL Research

20 September 2017

 

Fauji Cement Company Limited

FCCL: FY17 EPS @ PKR 1.89 (down 51% YoY)

 

FCCL: 4Q EPS @ PKR 0.46, down 36% YoY

Fauji Cement Company Limited (FCCL) announced its FY17 result today, posting a profit after tax (PAT) of PKR 2,613mn (EPS: PKR 1.89), massively down by 51% YoY from the preceding period’s bottom-line of PKR 5,367mn (EPS: PKR 4.03) mainly on account of closure of line-II. During 4Q, profitability clocked-in at PKR 641mn (EPS: PKR 0.46), down 36% YoY from 4QFY16 earnings of PKR 1,004mn (EPS: PKR 0.72). Alongside the result, the company also announced a final cash dividend of PKR 0.90/share.

 

Result Highlights

  • FCCL displayed a 2% YoY uptick in topline during FY17 to PKR 20,423bn, attributable to a 3% incline in total cement dispatches (Local / Exports were up / down by 12% / 63% YoY).
  • During 4Q the company witnessed a 4% YoY descent in its net sales given a 6% YoY retraction in dispatches in light of Eid holidays and monsoon rains.
  • Gross margins retracted by 24ppts to 22% in FY17 due to lacklutre trading margins on locally procured clinker tagged with higher coal prices (up on average by 47% YoY in FY17). While margin attrition of 22pts YoY in 4Q to 21% was on account of similar reasons.
  • The company also registered a drastic 70% decline in finance costs to PKR 153mn in FY17 amid debt retirement.
  • Insurance income to the tune of PKR 306mn was also claimed on the loss of silo (line II).
  • Effective taxation during the FY17 was booked at 34% while 42% charge in 4Q depicts impact of super tax in the current quarter.

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Fauji Cement Company Limited (FCCL): Resumption of line 2 operations to boost margins

 

Wednesday, 07 February 2018

By: Ismail Iqbal Securities (Pvt.) Limited

  • Fauji Cement Company Limited (FCCL) is scheduled to announce its 2QFY18 result on Monday, February 19, 2018.
  • We expect the company to post earnings of PKR 1,056 million (EPS: PKR 0.76) in the quarter, showing a growth of 52% on YoY basis as we expect gross margin to improve due to resumption of line 2 operations.
  • However, as the cement prices in North remained under pressure during the quarter, we expect the company’s topline to decline by 2.5% YoY despite rise in total dispatches by 7% YoY. Further we expect the company to pay an interim dividend of PKR 0.75/share.
  • According to provisional cement dispatches data, FCCL’s total dispatches during the quarter remained robust, reporting a growth of 7% on YoY basis. But as the cement price during the quarter remained under pressure, we expect company’s topline to decline by 2.5% YoY.

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Fauji Cement Company limited (FCCL): Downgraded to ‘Hold’

 

Wednesday, 07 February 2018

By: Sherman Securities (Pvt.) Ltd.

  • Recent price performance of Fauji Cement Company limited (FCCL) has led us to revisit our stance on the stock. We have downgraded our rating on FCCL from 'Buy' to 'Hold'.
  • The stock has appreciated by 14% CYTD and has outperformed benchmark KSE-100 index by 5%. We believe the market has adequately incorporated the benefits that are expected to arise from recent commencement of its Line-II operations which was earlier collapsed due to silo incident.
  • The stock is trading at P/BV of 2.2x, compared to our cement universe P/BV of 1.4x. Moreover, the stock is trading at an expensive EV/ton of US$109
  • Given robust demand outlook and near to full capacity utilization, almost all cement manufacturers announced capacity expansion plans. Recently in Dec'17, board of directors of FCCL in a special meeting approved the feasibility study for green field expansion of which details are still awaited.

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Fauji Cement Company Limited (FFCL): 2Q EPS clocked in at PKR0.6 – Below expectations

 

Monday, 19 February 2018

By: Insight Securities (Private) Limited

  • FCCL has announced its 2QFY2018 results where the company has posted a profit of PKR824m (EPS: PKR0.60), taking 1HFY2018 profit to PKR1.3b (EPS: PKR0.92). The result is below expectations mainly due to lower than expected growth in gross margins
  • The company did not announce any dividend, contrary to our expectations of PKR0.8/share.
  • During 2Q FY2018, net sales of the company increased by 14% QoQ due to 22% rise in total dispatches. Gross margins improved by 9.7pps to 26.2% due to absence of low margin clinker during most part of the 2QFY2018
  • On YoY basis, earnings grew 19% led by 7% growth in volumes (mainly exports) and 4.3pps improvement in gross margins. Further, lower effective tax rate of 28% vs. 32% in SPLY also strengthened the bottom-line.

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Fauji Cement Company Limited (FCCL): 1HFY18 EPS clocks in at PKR0.93

 

Monday, 19 February 2018

By: BIPL Securities Limited

  • Fauji Cement Company Limited (FCCL) announced its 2QFY18 results, recording earnings of PKR824mn (EPS: PKR0.6) vs. PKR444mn (EPS: PKR0.3) in the prior quarter, up by 85%QoQ.
  • We attribute the surge in earnings on QoQ basis to resumption and upgradation of its major line to 7600tpd from 7200tpd.
  • Consequently the company’s gross margins have improved to 26% in 2QFY18 from 17% in 1QFY18 owing to in-house production of clinker from Oct 15, 2017.
  • Additionally, FCCL’s admin and other expenses have also surged by 148%QoQ and 104%QoQ, respectively in 2QFY18.

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Fauji Cement Company Limited (FCCL): Result Review: FCCL 1HFY18 EPS Rs0.92

 

Monday, 19 February 2018

By: Sherman Securities (Pvt.) Ltd.

  • Fauji Cement Company Limited (FCCL) posted 1HFY18 EPS of Rs0.92, down 2.7%YoY as compared to EPS of Rs0.94, during the same period last year.
  • In spite of 13% increase in overall dispatches, revenue of the company grew by just 1%YoY to Rs10.3bn during 1HFY18. Restriction in revenue growth can be attributable to 10%YoY lower retention prices.
  • Despite commencement of line-II from late Oct’17, gross margin remained flat at 22%YoY in 1HFY18 as lower retention prices restricted improvement in gross margin.
  • On a sequential basis, earnings of the company remained higher by 86%QoQ to Rs0.60/share. Higher earnings can be attributable to lower reliance on expensive clinker amid commissioning of plant. Resultantly, gross margin improved by 9ppts to 26% in 2QFY18.

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Fauji Cement Company Limited (FCCL): 1HFY18 EPS fell 3%YoY to PKR0.92

 

Monday, 19 February 2018

By: Pearl Securities Limited

  • Fauji Cement Limited announced its 1HFY18 financial results wherein the company posted a profit after tax of PKR1,268mn (EPS PKR0.92) as against PKR1,303mn (EPS PKR0.94) in the corresponding period of last year, down 3%YoY. The earnings arrived lower than expected primarily due to below expected gross margins during the half.
  • Top-line growth contained to a meager 1%YoY, despite higher volumetric growth, clocking in at PKR10,286mn during 1HFY18 versus PKR10,187mn in the same half last year. This is in the backdrop of lower retention levels which shrank substantially during the half.
  • On a quarterly basis, gross profits of the company arrived at PKR1,435mn as against PKR1,272mn, up by a decent 13%YoY. This improvement can be attributed to resumption of Line-II that helped FCCL in reducing cost as the company had been procuring costly clinker from other producers previously.
  • Moreover, finance cost plunged by 50%YoY to PKR74mn. In addition to this, effective tax rate clocked in at 28% as compared to 30% in the same half last year which further duly supplemented the bottom-line.

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Fauji Cement Company Limited (FCCL): 1HFY18 performance; EPS PKR 0.92 (down 3% YoY)

Monday, 19 February 2018

By: Arif Habib Limited

  • Fauji Cement Company Limited (FCCL) announced its 2QFY18 result today, posting profit after tax (PAT) of PKR 824mn (EPS: PKR 0.60), up 19% YoY as compared to bottom-line of PKR 694mn (EPS: PKR 0.50) during SPLY. This takes 1HFY18 profitability to PKR 1,268mn (EPS: PKR 0.92), down 3% YoY from 1HFY17 profitability of PKR 1,303mn (EPS: PKR 0.94)
  • FCCL witnessed stagnant topline (1% YoY) during 1HFY18 amid lower cement prices in the north region which eroded the 12% YoY growth emanating from total dispatches.
  • Gross margins retracted by ~106bps during 1HFY18 to 21.7%, in contrast to 22.8% in 1HFY17 due to higher average coal prices (+20% YoY) and fuel costs. Whereas 2QFY18 gross margins clocked-in at 26.2% against 21.6% in the same period last year as restoration of line-2 by end Oct’17 aided margins.
  • Meanwhile, the company registered lower finance costs (PKR 42mn), depicting a tumble of 41% YoY.

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