Karachi, April 11, 2023 (PPI-OT): CHCC: Riding out macro headwinds

CHCC actively participated in the previous expansion cycle where the company commissioned two expansion lines with a 1.3/2.1mn tons of capacities in FY17 and FY19, respectively.

We expect domestic market share of CHCC to dilute to 6.4%/5.9% in FY23/FY24 from 6.8% in FY22. While exports are expected to grow by a CAGR of 13% between FY23-FY26.

High reliance on Afghan (~90% of coal mix) and local coal tend to shield the gross margins. Furthermore, on the power mix front, WHR(23MW) and Solar(13MW) actively contribute around ~34% of the company’s total power requirement.

CHCC is the highest leveraged companies in our universe with a D/E of 0.70 and D/A of 0.35. Finance cost to EBITDA is expected to clock in at 18% in FY23 compared to 13.9% in FY22.

We have a “HOLD” rating on the stock with Dec’23 target price of PkR139/sh, which provides an upside potential of 24% from the last close.