Karachi, September 27, 2021 (PPI-OT): PIOC: Nothing exciting in 4QFY21E result

We present earnings estimates for Pioneer Cement Limited (PIOC) ahead of the June-2021 result announcement scheduled tomorrow. We expect 4QFY21 EPS to clock in at Rs2.88 (+108% YoY), taking FY21E EPS to Rs10.64. On a QoQ basis, we expect a slight dip in margins for the company as a result of higher coal costs and lower volumetric sales.

Pioneer Cement Limited (PIOC): The board of Pioneer Cement Limited (PIOC) is scheduled to meet on 28th September, 2021 to discuss its FY21 financial result. For 4QFY21 we expect the company to post a profit of Rs654mn (EPS: Rs2.88), versus a reported profit of Rs314mn (EPS: Rs1.38) during 4QFY20 which was primarily due to tax reversal. The company had otherwise posted an operating loss in the SPLY. Largely on account of better retention prices, full year earnings for FY21 are estimated to clock in at Rs10.64/share compared to a loss of Rs0.92/share last year. We expect that earnings are likely to decline on a QoQ basis, primarily due to dim gross level performance (expect a 0.8ppt QoQ decline) where the main culprits were higher coal prices and inability to timely pass on this hike.

The cement sector has been facing rising input costs and freight charges for the past several months. Local demand growth has also remained subdued in recent months due to the monsoon season, resulting in constraints for the industry to pass on the impact of high input cost to the end consumer (refer to our report from last month titled ‘Cements: Tough months ahead’). Now that the demand has started to improve, we expect players in the North would be in a somewhat better position to increase retail prices. Of late, there has been government pressure on the sector as well to keep prices in check. Here, we would like to update that the industry has recently met with the government to present their case as to how price increases are necessary to relay input costs. Cement players in the Northern region are expected to increase prices by Rs10-12/bag in the coming days as Coal prices have made a new high with futures now trading at ~US$172/ton. Even with valid reasons to increase prices, we see delayed nominal price hikes in the near future.