Pioneer Cement Ltd (PIOC) has posted NPAT of PKR0.6mn (EPS: PKR2.58) for 1QFY23 up 22% YoY, higher than our estimated NPAT of PKR0.5bn (EPS: PKR2.12). A higher-than-expected top line led to the deviation.

Key observations

Net sales have increased by 34% YoY but are down 11% QoQ to PKR8.3bn in 1QFY22, higher than our expected revenue of PKR7.9bn. The increase in QoQ revenue majorly stemmed from a 14% QoQ increase in retention prices, in our view.

Gross margins have reduced by 0.6ppt YoY and 1.8ppt QoQ to 22.9% in 1QFY23, largely in line with our expectation of 22.5%. Sequentially, the decline in GMs is mainly attributed to higher realized coal prices and low coal opening inventory.

Finance costs have increased by 58% YoY and 27% QoQ to PKR915mn. This is due to the increase in interest rates.

Among other line items: (i) PIOC has booked an effective tax rate of 33% vs. 35% in SPLY, despite implementation of super tax in FY23 budget.

PIOC has posted relatively weaker margins than the 1QFY23 industry average, due to higher realized coal prices. Looking ahead, we think that higher local demand post floods and increase in cement prices, coupled with ease off in international coal prices, will likely help PIOC post decent earnings for the remainder of FY23f. We maintain our Buy stance on the stock with a TP of PKR92/sh.

Courtesy – Intermarket Securities Limited