Karachi, August 23, 2023 (PPI-OT): FCCL 4QFY23 and FABL 2QCY23 Result Previews

FCCL-4QFY23 EPS of PkR0.6 expected: The board of Fauji Cement Company Ltd. (FCCL) is scheduled to announce its 4QFY23 result on Aug 29th, where we expect the company to post a Profit after Tax of PkR1.4bn (EPS basic: PkR0.6) vs. PAT of PkR1.9bn (EPS: PkR0.7) in 3QFY23, a decline of 25%QoQ. The said decline in the bottom line is due to decline in sales and higher taxation charge during the quarter that offsets the improvement in gross margins. Topline is expected to shrink by 12%QoQ to clock in at PkR16.0bn vs. PkR18.2bn in the previous quarter, majorly due to 16.6%QoQ decline in the company’s offtake, offsetting the 3%QoQ increase increment prices during the quarter.

Gross margins are expected to climb to 27.5% during the quarter vs. 25.9% in the previous quarter, attributable to the decline in coal prices and reduced reliance on grid. Other income is projected to clock in at PkR448mn (up 58%QoQ), driven by increase in ST investments and rise in the policy rate during the period. Moreover, effective tax is anticipated to be ~PkR1.8bn (ETR: 56% vs. 30% in 3QFY23). Overall, full-year earnings are expected to increase by 18%YoY to clock in at PkR3.4/sh due to increase in cement prices and improvement in GMs. Finally, we do not expect company to pay any cash dividend owing to rising capital requirement to fund ongoing expansion (2.1mn TPA in D.G Khan; expected COD 2HFY24).

FABL – 2QCY23 earnings to clock in at PkR2.56/sh: Faysal Bank Limited (FABL) is set to report its earnings for the 2QCY23 on Thursday. We anticipate the bank will post earnings of PkR3.88bn (EPS: PkR2.56), marking an increase of 17.5%/72.8% on a QoQ/YoY basis. The rise in quarterly earnings is attributed to expanding NIMs, which are expected to reach 5.51% during the period, up from 5.1% in 1QCY23 and 3.9% in SPLY. The quarterly margin expansion is expected to be driven by 1) Deposit growth, and 2) Improvements in Net Interest Income (NII), up 9.5%QoQ. Overall, we expect the bank’s deposits to grow at ~4% and retain its market share at ~3.40% for the quarter, albeit lower than industry’s growth (up 6%YoY).

This is majorly attributable to the bank’s recent Islamic conversion, possibly prompting depositors to seek better returns on savings elsewhere. Overall, we expect provision coverage to remain constant at 89% of total NPLs. On the opex front, cost to income ratio is expected to remain flat at ~51%. We don’t expect the bank to announce a half yearly dividend amidst tight capital adequacy situation and rising provisioning expenses during the period. Overall, we have a ‘Buy’ stance on the Bank with a Dec’23 TP of PkR35/sh, offering a potential upside of 38% from last close.