Cherat Cement Company Limited (CHCC) is expected to announce 2QFY23 results sometime in late Jan/early Feb’23. We expect the unconsolidated EPS for the quarter to clock in at PkR9.3, up by 22%/52% on QoQ/YoY basis. On the topline front, sales are expected to clock in at PkR10.85bn (up 20%/52% QoQ/YoY), majorly on the back of increased offtakes as demand recovered from low-base of 1QFY23, with offtakes expected to settle at 850k tons for the quarter.

However, we expect gross margins to clock in at 31% for 2QFY23 (vs. 32% during 1QFY23), majorly due to the unavailability of a captive gas generator in winter alongside depleting low-cost coal inventories, keeping margins in check. Overall, finance costs (D/E: 0.83 1QFY23) are expected to hurt in the near term, where-in the company is expected to borrow significantly due to PkR36bn expansion (expected FY25). However, delays in the capital project may be expected due to prevailing LC/supply chain issues.

Overall, the company is expected to post PAT of PkR3.3bn (EPS: 17.0) for 1HFY23, up 33%YoY.

Courtesy – AKD Research