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.

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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.

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 →