Pioneer Cement Ltd (PIOC) has posted a NPAT of PKR485mn (EPS: PKR2.14) for 3QFY22, down 29% yoy and 27% qoq. The result has come in lower than our estimated NPAT of PKR567mn (EPS: PKR2.49). Higher-than-expected effective tax rate is the major deviation. The result takes net profits in 9MFY22 to PKR1.6bn (EPS: PKR7.17), up 26% yoy.

Key result highlights for 3QFY22:

Net sales have increased by 23% yoy but are down 10% qoq to PKR7.7bn in 3QFY22, in line with our expected revenue of PKR7.8bn. The decline in qoq revenue majorly stemmed from 18% qoq decline in sales volumes to 0.8mn tons.

Gross margins declined by 3.4ppt yoy but are up 0.7ppt qoq to 21.3% in 3QFY22. The slight increase in sequential GMs is mainly attributed to the rise in local cement prices and efficient coal inventory management, coupled with shift to Afghan coal. GMs have come in line with our expected margins of 21%.

Finance costs have increased by 56% yoy and 29% qoq to PKR764mn; this is due to increase in both short-term borrowing and interest rates.

Among other line items: (i) distribution expenses have declined by 18% yoy to PKR28mn amid lack of exports, and (ii) PIOC has booked an effective tax rate of 36% vs. 29% in SPLY.

PIOC has posted relatively better gross margins in 3Q, despite elevated cost pressures and lower-than-adequate increase in local cement prices. Looking ahead, we think better local demand coupled with the recent rise in local cement prices will help PIOC to post decent gross margins and net profits in the coming quarter.

We maintain our Buy stance on the stock with a TP of PKR92/sh.

Courtesy – Intermarket Securities Limited.