Karachi: Cherat Cement (CHCC) recently held an analyst briefing to discuss its business performance and future outlook. The company revealed plans surrounding its acquisition of NICL, with CHCC's stake projected to be between 70-75%, including a tender offer. The existing management will retain approximately 15% ownership. The acquisition is expected to conclude in the coming months, with the remaining financial consideration to be covered by a seven-year syndicated loan from two local banks. This will be supplemented by Cherat Cement's cash reserves and short-term investments, which total around Rs16 billion.

According to JS Global, NICL generated approximately Rs48 billion in revenue and Rs2.3 billion in profit last year. Cherat Cement aims to improve operational efficiencies and explore value-added product opportunities. While the management remains hopeful about domestic cement demand, bolstered by public-sector spending and housing finance schemes, rising inflation and interest rates, along with geopolitical tensions and energy price fluctuations, could impact demand.

The briefing also highlighted the fuel mix, noting that local Thar coal accounted for about 72% of total coal consumption in FY26. Imported RB2 coal is currently priced at approximately US$150-154 per ton, while local coal costs Rs60-61k per ton. The company has maintained a coal inventory that covers 1.5-2 months of consumption at lower prices, though increased costs are expected to gradually affect production expenses.

Cherat Cement's management reported that the increased cost per ton to Rs12,295 in 4QFY26 was due to reduced dispatches following the Afghan border closure and increased stores consumption. However, costs improved to around Rs11,300 per ton in 1QFY27. In terms of power mix, renewable energy sources accounted for 55% of total power requirements, with hydropower contributing 15-20% at significantly lower rates than grid tariffs.

The company's average domestic retention price stood at Rs16-16.5k per ton in FY26, and the KPK royalty rate has been revised to Rs385 per ton. The company maintains a Buy stance, trading at a FY27E PE of 5.9x and a dividend yield of 3%.