February 12, 2020 (PPI-OT)

CHCC: 1HFY20 LPS clocked in at PkR2.88 - Better than expectation

Cherat Cement Company Ltd. (CHCC) has announced results for 1HFY20 where company posted loss after tax of PkR560mn (LPS: PkR2.88) against profit after tax of PkR1.0bn (EPS: PkR5.29) in 1HFY19. For 2QFY20, company posted a loss of PkR222mn against profit/loss after tax of PkR596/339mn of 2QFY19/1QFY20.

Topline depicted the trend witnessed by volumes where a QoQ/YoY increase in dispatches for 2QFY20 resulted in topline increasing by 12/36% QoQ/YoY while increased dispatches for 1HFY20 (68%) on YoY basis led to an increase of 35%YoY in sales.

Gross margins for 2QFY20 increased to 9.3% for the quarter against 4.2% in 1QFY19 on the back of recovery in prices and demand however they remain low compared to 19.3% witnessed in 2QFY19 as price competition between the players continues to impart its effect.

Finance cost sank the ship for the company, standing at PkR658mn for the quarter after strain on cash flows due to depleted profitability and financing for the new expansion led to total debt standing at PkR19.7bn as of Sep'19.

Company recorded negative taxation of PkR110mn for the quarter which provided some solace as loss before tax of PkR332mn was decreased to loss after tax of PkR222mn.

We expect the depressed profitability to continue with fickle pricing scenario and increasing costs in the backdrop. Our TP of PkR39.3/sh implies a downside of 23% on the stock - Sell.

© Pakistan Press International, source Asianet-Pakistan