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KOHC - Kohat Cement Company Limited

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KOHC: Growing volumes keeps boosting profits

 

Thursday, 13 April 2017

 

By: WE Financial Services Limited

 

In our today's morning briefing we would discuss the performance of Kohat Cement Company Limited (KOHC) in 1HFY17.

 

On back of lower energy costs and increased domestic sales volume, the profit after taxation (PAT) of KOHC managed to post a growth of 4% YoY in 1HFY17 to Rs 2,190 million (EPS: Rs 14.17) as against a PAT of Rs 2,101 million (EPS: Rs 13.6) in 1HFY16. However decline in exports, higher effective taxation, drop in other, income, and lower finance cost were among the factors that restricted the bottom-line growth.

 

On back of lower energy costs and increased domestic sales volume, the profit after taxation (PAT) of KOHC managed to post a growth of 4% YoY in 1HFY17 to Rs 2,190 million (EPS: Rs 14.17) as against a PAT of Rs 2,101 million (EPS: Rs 13.6) in 1HFY16. However decline in exports, higher effective taxation, drop in other, income, and lower finance cost were among the factors that restricted the bottom-line growth.

 

The net revenue of the company reached Rs 7,164 million in 1HFY17 which is 2% YoY up when compared to Rs 7,058 million in the identical period in FY16. This growth in revenue was on back of increased local sales volume which grew by 6% YoY in 1HFY17 to 988k tons versus 934k tons in 1HFY16 owing to growing construction activities in the country, developments related to China Pakistan Economic Corridor (CPEC), and spending through Public Sector Development Programme (PSDP). The export sales however remained low as it fell by 21.4% YoY in 1HFY17 to 81k tons as against 103k tons in 1HFY16. The cost of sales was down by 4% YoY in 1HFY17 due to availability of cheaper electricity from its Waste Heat Recovery Power Plant. Therefore gross profit managed to increase by 9% YoY in 1HFY17 to Rs 3,364 million as against Rs 3,093 million in 1HFY16. Consequently, gross profit margin reached 46.7% in 1HFY17 versus 43.8% in 1HFY16

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Kohat Cement Company Limited (KOHC): Result Previews

 

 

19 April 2018

Azee Securities (Pvt.) Ltd.

 

 

 

  • The board meetings for the 9MFY18 financial results of Kohat Cement Company Limited (KOHC) and Pakistan Petroleum Limited (PPL) are scheduled to be held on April 21, 2018 & April 24, 2018 respectively.

KOHC: Decline in earning foreseen

  • We expect company to post 23% YoY decline in earnings as profit after taxation to fall at Rs 2,397 million (EPS: Rs 15.51) as against Rs 3,121 million (EPS: Rs 20.20) in 9MFY17. This is expected owing to lower cement prices and higher coal prices. Similarly, we expect decrease in profitability by 19% YoY to Rs 752 million (EPS: Rs 4.87) in 3QFY18 versus Rs 931 billion (EPS: Rs 6.03) in 3QFY17 due to lower retention prices and fuel cost. On the revenue side, net sales is expected to decrease by 2% YoY to Rs 10.47 billion in 9MFY18 against Rs 10.65 billion owing to lower cement prices.
  • However, volumetric sales to surge by 6% YoY to 1.71 million tons in 9MFY18 versus 1.60 million tons on the back of higher domestic dispatches which would rise by 9% to 1.63 million tons in 9MFY18 against 1.50 million tons in 9MFY17 mainly driven by higher demand. Gross profit to fall by 23% YoY to Rs 3.72 billion against Rs 4.81 billion tons in 9MFY17.

PPL: Robust earnings growth expected

  • PPL earnings likely to up by 73% to Rs 32.96 billion (EPS: Rs 16.72) in 9MFY18 as against Rs 19.07 billion (EPS: Rs 9.67) in the identical period of last year. This is primarily expected due to increase in crude oil & wellhead gas prices along with higher other income. Similarly, earnings to hike by 50% YoY in 3QFY18 as profit to surge at Rs 10.94 billion (EPS: Rs 5.55), from Rs 7.27 billion (EPS: Rs 3.69) in 3QFY17 mainly due to increase in crude and wellhead gas prices and increase in production.
  • Net sales to jump by 44% to Rs 92.37 billion versus Rs 63.97 billion in 9MFY17 due to higher average crude oil prices by 23% YoY to $58.70/barrel against $47.80/barrel. Other income to rise by 99% YoY to Rs 6.81 billion against Rs 3.43 billion in 9MFY17 on account of higher exchange gains.

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Kohat Cement Company Limited (KOHC): 3QFY18 EPS clocks in at PKR4.22 down 30% YoY; DPS, Nil

 

 

23 April 2018

Al Habib Capital Markets (Pvt.) Limited

 

 

 

  • KOHC announced its 3QFY18 result on April 21st wherein the company reported an EPS of PKR4.22 down 30%, YoY, & lower by 26%, YoY, during 9MFY18.
  • The company reported 3Q revenue of PKR3,517mn up 1%/down 3% YoY/9MFY18, YoY, despite a drop in retention prices, bolstered by 9% QoQ jump in sales volume.
  • However, lower retention prices (down PKR19/bag), linear demand in north, rising international coal prices and Rupee devaluation resulted in lower than expected gross margin of ~28%.
  • We maintain our ‘BUY’ recommendation on KOHC with June-18 TP of PKR225.38 which offer an upside potential of 45%.

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Kohat Cement Limited (KOHC): Higher cost suppresses 9MFY18 profitability

 

 

23 April 2018

Pearl Securities Limited

 

 

 

  • Kohat Cement Limited has announced its 9MFY18 financial results wherein the company posted a profit after tax at PKR2,296mn (EPS PKR14.86) versus PKR3,121mn (EPS PKR20.20) in the corresponding period of last year, down 26%YoY.The earnings arrived slightly above our expectation primarily due to higher than projected gross margins during the period.
  • Top-line of the company declined by 3%YoY to PKR10,385mn as against 10,685 in the same period of last year. This is mainly due to depressed retention levels during 9MFY18 despite volumetric growth (up 7%YoY)
  • On a quarterly basis, bottom-line of the company arrived at PKR652mn (EPS PKR4.22) in 1QFY18 versus PKR931mn (EPS PKR6.03) in the same quarter of last year, down 30%YoY. This reduction is attributable to decline in KOHC’s margin which are down by a massive 14ppsYoY to 28% as compared to 42% in same quarter of last year in the wake of higher coal prices.

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Kohat Cement Company Limited (KOHC): 9MFY18 EPS @ PKR 14.86 (down by 26% YoY)

 

 

23 April 2018

Arif Habib Limited

 

 

 

  • Kohat Cement Company Limited (KOHC) announced its 3QFY18 result today, posting a profit after tax (PAT) of PKR 652mn (EPS: PKR 4.22), down by 30% YoY as compared to a bottom-line of PKR 931mn (EPS: PKR 6.03) during SPLY. This takes 9MFY18 profitability to PKR 2,296mn (EPS: PKR 14.86), down by 26% YoY from 9MFY17 earnings of PKR 3,121mn (EPS: PKR 20.20).
  • KOHC displayed a trivial topline growth of 1% YoY to PKR 3.5bn during 3QFY18 as lower cement prices in the north region offset the 17% jump in offtake (0.62mn tons vis-à-vis 0.54mn tons).
  • Gross margins pulled back by ~14pps in 3QFY18 to 28% (3QFY17: 42%) attributable to higher average coal prices (+13% YoY), PKR losing 6% against the USD and lower prices in north.

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Kohat Cement Company Limited (KOHC): 9MFY18 EPS at PKR14.86, down 26%YoY - in line with expectations

 

 

23 April 2018

Taurus Securities Limited

 

 

 

  • Kohat Cement Company Limited (KOHC) announced its 9MFY18 financial results today, where the Northern cement manufacturer posted a PAT of PKR 2.3bn (EPS: PKR 14.86), down a massive 26%YoY.
  • Gross margins in 9MFY18 fell by a significant 11.34pps YoY largely on the back of ~17%YoY increase in coal prices, further escalated by ~3% PKR depreciation against USD.
  • In 3QFY18, KOHC's bottom-line dipped by 12%QoQ to PKR 4.22/sh. vs. PKR 4.80/sh. in 2QFY18 mainly on account of i) a ~2%QoQ uptick in coal prices, ii) ~5% PKR depreciation, and iii) a ~2%QoQ drop in avg. selling prices.

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Kohat Cement Limited (KOHC): Relatively a safer bet

 

21 June 2018

Foundation Securities (Pvt.) Limited

 

 

 

  • Kohat cement (KOHC) Brownfield expansion to offer greater flexibility in expanding mkt share and improving efficiency by reducing reliance on older plant. KOHC has strong BS (Rs10bn of total ST/LT investment with Rs66/sh impact) that is sufficient to finance equity portion of project cost. Thus, it will lower financial leverage risk at times of interest rate reversal cycle. New grinding mill would give ST dispatches growth.
  • KOHC is trading at lowest EV/ton ratio in FSL’s cement universe. We believe, discount to peers does not justify its upside potential. We have buy stance on the stock that is trading at low PE of 7.0x (implied core PE of 7.6x) with Dec-18 TP of Rs164.6/sh.
  • The Company is expanding its capacity by 2.3mn ton/annum that would increase its capacity based market share by 1ppt to 8% (post expansionary cycle). The projected cost is estimated at Rs16bn (including recent Rs devaluation) with debt/equity of 50:50. To highlight, KOHC already has sufficient funds (Rs6.5bn as of March 2018) to inject equity portion. The plant is expected to commission in December 2019 that would help to (1) surge dispatches, (2) increase penetration to new regions, (3) improve cost/ton ratio and (4) new 20MW WHR plant would reduce reliance on grid and expensive FO based power generation.

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Kohat Cement Company Limited (KOHC): Disappointing performance amid lower gross margin

 

03 July 2018

Azee Securities (Pvt.) Ltd.

 

 

 

  • In our today's morning report we would discuss the performance of Kohat Cement Company Limited (KOHC) in 9MFY18.
  • Primarily owing to higher coal prices and lower cement prices, the profit after taxation (PAT) of KOHC fell by 26% YoY in 9MFY18 to Rs 2.29 billion (EPS: Rs 14.86) as against a PAT of Rs 3.12 billion (EPS: Rs 20.2) in 9MFY17. However, higher volumetric sales and lower effective taxation provided some support to the bottom-line. Though the cement prices showed upward trend during March 2018; however, these have been continuously decreasing during earlier months for the nine-month period under review.
  • The overall volumetric sales of the company increased by around 9% YoY in 9MFY18 to 1,743k tons as against 1,606k tons of cement sold in the identical period in FY17. This is on back of higher domestic sales which grew by 11% owing to growing construction activities in the country including private sector construction and projects associated with China Pakistan Economic Corridor (CPEC) and PSDP. The domestic sales totaled 1,664k tons in 9MFY18 versus 1,503k tons in 9MFY17. The export sales however fell by 23% YoY in 9MFY18 to 79k tons as against 103k tons in 9MFY17.

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Kohat Cement Limited (KOHC): Cementing growth via expansion

 

 

03 July 2018

EFG Hermes Pakistan Limited

 

 

 

  • Given a weak margin outlook (weaker pricing, higher coal prices, and PKR deval.) and high earnings sensitivity to pricing indiscipline, Kohat’s woes are no different from its peers. The sharp decline in its stock price (46% over past 12 months vs. 41% in the sector) has largely priced in the headwinds to earnings, in our view. We cut our FY18/19 earnings by 24/30% due to i) weakening margin assumptions on higher coal prices (USD100/90/85 per tonne in FY19-20 and onwards); ii) subdued below-inflation cement price growth (stagnant in FY19, +2/+3/+4% in FY20/21 and FY23 onwards); and iii) currency depreciation of 4% p.a.. We cut our TP to PKR173, but as this implies 39% upside potential we maintain our Buy rating; the stock is trading at 7.2x 2019e P/E.
  • While escalating costs will keep margins constrained (avg. 25.9% for FY19-23 vs. 43/34% in FY17/FY9M18), higher grinding capacity and expansion should drive an earnings CAGR of 14% over FY18e-FY23e (we forecast earnings to fall 6% Y-o-Y in FY19). Kohat has lagged its competitors in maximising utilisation owing to limited grinding capacity (avg. CU of 71% in FY16-FY9M18, vs. the industry’s 89%), which it has now addressed through the recent installation of 105tph grinding unit in April, which should allow it to grind enough clinker to match its name plate capacity. We believe this will not only help the company achieve volumetric growth, but will also support preserving its market share until the time when its expansion comes online – we have incorporated the expansion from FY2H20 (vs. mgmt guidance of FY1H20). However, we expect earnings to grow at a four-year (FY19-23) CAGR of 20% backed by the expansion kicking in and a tax credit of PKR1.8bn under section 65B of the tax ordinance.

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