Cherat Cement Company Ltd. (CHCC) announced its 3QFY25 financial results, reporting profitability of PkR1.7bn (EPS: PkR8.67), up 35%YoY from PkR1.2bn (EPS: PkR6.4) in SPLY. Earnings came slightly above our expectations due to higher-than-anticipated gross margins.

·         Revenue declined by 10%YoY to PkR7.8bn, where 14%YoY decrease in volumes during the quarter overshadowed 2%YoY increase in retention prices.

·         Gross margins improved to 40.0% from 29.6% in SPLY, driven by lower energy costs due to, i) declining coal prices and ii) cheaper furnace oil prices, down 3.5%YoY. We believe, company shifted it’s reliance to RFO from gas due to higher gas rates for captives and recently imposed levy.

·         Operating expenses rose by 9%YoY, mainly due to 30%YoY increase in administration cost.

·         Other income surged 92%YoY to PkR267mn, due to 5.6x YoY increase in short-term investments.

·         Finance cost dropped by 62%YoY to PkR124mn due to lower outstanding borrowings and easing interest rates.

·         Company reported an effective tax rate of 39%, compared to 36% in SPLY and 37% in 1QFY25.

·         We maintain our ‘BUY’ stance on CHCC with Dec’25 TP of PkR379/sh. Our positive outlook is supported by the company’s expected earnings growth driven by lower royalty rates in the KPK region amid higher cement prices.

Courtesy- AKD Research