AKD Securities Limited - Off the Analyst's Desk (October 18, 2022)

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AKD Securities Limited – Off the Analyst’s Desk (October 18, 2022)

October 18, 2022

Karachi, October 18, 2022 (PPI-OT): FCCL: FY22 Analyst Briefing Takeaways

Fauji Cement Company Limited (FCCL) held its analyst briefing today to apprise investors of the FY22 result and its future outlook. To recall, FCCL posted a PAT of PkR7.11bn (EPS: PkR3.26), up 29.4%YoY. To highlight, FCCL posted a PAT of PkR3.05bn (EPS: PkR1.4), up 57%YoY in 4QFY22 owing to a strong GM of 25.5% during the quarter.

In FY22, cement dispatches stood at 5.6mn tons post-merger compared to 3.5mn tons in FY21, cumulating an increase of 60%YoY in FY22. Moreover, local sales stood at 5.3mn tons, up 66%YoY in FY22. On the export front, sales stood at 0.31mn tons in FY22.

The company has a current total captive power plant capacity of 89MW which comprises of Solar/WHRPP/Thermal Power of 28/40/21MW. Moreover, the expected expansion is likely to bring the total power mix to 114MW. Commenting on sustainability measures, FCCL currently deploys green energy sources that meet 45% of the total power requirement. Furthermore, FCCL also accumulated 90,005 tons of carbon credit as well in FY22.

Currently, Afghan coal is procured at PkR53-55k/ton while local and afghan coal mix stands at 70% of the total fuel mix, with 30% being covered by imported coal.

Moving forward, cement sales are expected to decline by 10%YoY in FY23 while export sales are also likely to decline. Moreover, the margin on local sales is likely to remain on FY22 levels with efficient inventory management enabling the company to currently hold coal at PkR43-44K/ton.

The expansion of 2.05mn tons at the Nizampur plant is on schedule and expected to come online by the end of Nov’22, with a total CAPEX of PkR27bn and a Debt/Equity ratio of 63%/37%. Moreover, expansion in DG Khan’s Greenfield project of 2.05mn tons with a total associated Capex of PkR32.4bn and a Debt/Equity ratio of 63/37% is also likely to come online by the 3QFY24. The said expansion is expected to take the total market share of the company to 14% from 8% by the end of FY24, making it the 3rd largest player in the country.