AKD Securities Limited - AKD Daily (30 Aug 2023)

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AKD Securities Limited – AKD Daily (30 Aug 2023)

August 30, 2023

Karachi, August 30, 2023 (PPI-OT): MLCF, DGKC, CHCC and PIOC 4QFY23 Result Previews

MLCF 4QFY23 earnings expected at PkR 0.6/sh: MLCF is expected to announce its 4QFY23 results sometime next month, wherein we expect company to post PAT of PkR636mn (EPS: PkR0.6) vs. earnings of PkR1.4/sh in 3QFY23, down 58% QoQ, majorly attributable to reduced sales and higher taxation. The company's topline is expected to decrease by 16%/1% QoQ/YoY, reaching PkR14.3bn, owing to an 18%QoQ drop in the company's offtake. Gross margins are expected to improve to 25.7% compared to 24.9% in the previous quarter due to reduced reliance on the grid during the quarter. Additionally, finance costs are projected to rise by 49%/38% QoQ/YoY due to an increase in the interest rate (avg KIBOR 21.8% vs 18.9% in previous quarter). Overall, FY23 earnings are expected to reach at PkR5.3/sh, a 57% increase from PkR 3.4/sh in the previous year, driven by a 39%YoY rise in cement prices and improved gross margins.

DGKC-4QFY23 EPS of PkR1.16 expected: The board of DGKC is scheduled to announce its 4QFY23 results on Thursday, where we expect company to post a PAT of PkR509mn (EPS: PkR1.16) compared to earnings of PkR1.2bn (EPS: PkR2.69) in the previous quarter, a decline of 57%QoQ. The said earnings decline is majorly attributable to sales volume decline and retrospective tax charge. Revenue is expected to decline 5.7%QoQ on the back of 6% drop in cement offtake.

Gross margins are expected to slide down to 18.3% vs 19.0% in previous quarter due to increase in the power costs. Moreover, other income is expected to clock in at PkR697mn, a decline of 7.9%QoQ, due to absence of dividend income from Adamjee Insurance. Furthermore, financial charges are expected to increase 11%QoQ to reach PkR1.9bn during the quarter amidst interest rate hikes. Overall, full year earnings are expected at PkR5.98/sh vs. PkR6.78/sh in FY22, down 11.8%YoY, majorly due to increase in the financial charges for the year. Along with result, we expect company to announce dividend of PkR1.0/sh.

CHCC- 4QFY23 earnings to clock in at PkR3.0/sh: CHCC is expected to announce its 4QFY23 earnings on Sept 6th, wherein company is expected to report earnings of PkR591mn (PkR3.0/sh) vs. PkR1.3bn (PkR6.5/sh) in the previous quarter, a decline of 54%QoQ, majorly attributable to higher taxation charge, increase in finance cost and decline in sales. Revenue is expected to clock in at PkR8.8bn compared to PkR9.3bn in the previous quarter, a decrease of 5%QoQ due to 8% drop in the sales volume.

Gross margins are expected to remain flat on a quarterly basis where decline in the power cost is expected to offset by increase in weighted average coal cost. Furthermore, finance cost is expected to increase by 22%QoQ owing to interest rate hikes. Likewise, effective tax charge is expected to reach PkR900mn, ETR of 60.4% vs 31.1% in the previous quarter, due to impact of super tax. Overall, for FY23, earnings are expected at PkR25.2/sh vs. PkR22.7 SPLY, an increase of 11%YoY owing to gain in the gross profits amidst cement price increase during the period. Finally, we expect company to announce cash dividend of PkR1.5/sh, taking full year dividend to PkR3.0/sh.

PIOC-EPS of PkR1.6 is expected: PIOC is expected to announce its 4QFY23 results sometime in the next month, where earnings of PkR1.6/sh are expected, a decline of 62%QoQ compared to earnings of PkR4.2/sh. The notable decline in the earnings is majorly due to decline in sales volume, increasing financial charges and higher taxation during the quarter. Topline is expected to clock in at PkR8.4bn vs. PkR9.2bn in 3QFY23, a decline of 8%QoQ, due to 9% quarterly decline in company’s offtake (0.61mn tons vs. 0.68mn ton in previous quarter). Gross margins are expected to contract to 26.1% from 26.9% in the previous quarter, primarily due to elevated fixed costs during the quarter despite the unchanged weighted average coal and power costs.

Finance cost is expected to clock in at PkR1.0bn, up 21%QoQ, due to increase in the interest rates during the quarter. Furthermore, the implementation of super tax has contributed to an increase in the effective tax for the quarter, amounting to PkR626mn compared to PkR468mn in 3QFY23, resulting in an Effective Tax Rate (ETR) of 63% as opposed to 33% in the previous quarter. In FY23, earnings are expected to almost triple YoY, reaching PkR13.5/sh. This remarkable growth is attributable to improved gross margins and lower accumulated tax charge compared to the previous year.