Can CHCC maintain margins as sales slide? Here’s what to expect

Key takeaways:

• Expected PAT of PKR 1.5 billion, up 22% YoY
• Gross margin likely to rise to 32% on lower fuel and coal costs
• Sales to decline 6% YoY due to weak local and export dispatches
• Surge in other income driven by better returns on short-term investments
• Coal prices and discount rates provide major cost tailwinds

Cherat Cement Company Limited (CHCC) is expected to post a Profit After Tax (PAT) of PKR 1,512 million for 3QFY25, translating into earnings per share of PKR 7.78. This marks a solid 22% year-on-year increase, largely attributable to stronger gross margins and disciplined cost control despite a contraction in topline revenue.

Revenue dip overshadowed by cost gains

CHCC’s sales revenue is projected to clock in at PKR 8.16 billion, representing a 6% decline YoY. This weakness stems primarily from lower local and export dispatches, which dropped 6% and a staggering 74% YoY, respectively. Export volumes plunged to just 17,733 tons compared to 69,014 tons in the same period last year. Local dispatches also slipped to 488,360 tons.

Yet, despite these volume pressures, the company’s gross margins are expected to improve to 32%, up from 29.6% in 3QFY24. This margin expansion is a result of lower coal prices, improved operational efficiencies, and continued savings from renewable energy investments.

Macro tailwinds offer relief

Coal prices averaged USD 95.56/ton during the quarter, down 0.94% YoY and 15.57% QoQ, offering a welcome relief to the cost of goods sold. Meanwhile, the discount rate averaged 12%, sharply lower than 22% in 3QFY24, translating into lower finance costs and improved bottom-line performance.

Strong other income supports earnings

CHCC’s other income is expected to rise more than 3.5x YoY, reaching PKR 628 million, largely due to higher returns on a growing pool of short-term investments (PKR 15 billion) and cash balances (PKR 513 million). This additional income stream plays a vital role in cushioning the impact of falling dispatches.

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Robust 9MFY25 outlook

For 9MFY25, the company is expected to report EPS of PKR 34.28, up 43% YoY, showcasing the strength of its operational and financial execution even in a tough macro backdrop.

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Source: Al Habib Capital Markets (Pvt) Ltd.

⚠️ This post reflects the author’s personal opinion and is for informational purposes only. It does not constitute financial advice. Investing involves risk and should be done independently. Read full disclaimer →