Karachi, February 15, 2023 (PPI-OT): CHCC: 2QFY23 Result Review

Cherat Cement Company Limited (CHCC) announced their 2QFY23 result where the company posted PAT of PkR1.56bn (EPS: PkR8.0), an increase of 5%/32% QoQ/YoY. The result was slightly lower than our expectations as margins were dented where we expect that the cut in gas supply and depletion of low cost coal inventory may have elevated the COGS.

Net Sales clocked in at PkR10.4bn for 2QFY23, up by 15/37% QoQ/YoY because of improvement in the company offtakes (up by 14.5%QoQ). The increase in the offtakes is mainly due to demand recovery over the course of quarter where industry total offtakes in the north have increased by 27%QoQ.

Gross margins clocked in at 28.7% vs. 32%/27.3% for 1QFY23/2QFY23, where we believe unavailability of gas in winters and depletion of low cost inventory have impacted the margins.

Finance cost of the company reported at PkR521mn vs. PkR480mn in the previous quarter, an increase of 8%/73% QoQ/YoY, this is on the back of the 100bps rise in the SBP’s target rate.

Furthermore, Other Income also witnessed increase of 26%QoQ to clock in at PkR69mn vs. PkR55mn in the previous quarter.

Overall, this takes 1HFY23 PAT to PkR3.04bn against PkR2.4bn, up by 28%. The said increase is mainly attributed to the ~49% increase in the cement prices despite a ~9%YoY decline in the company offtakes.