Should investors worry about FCCL’s weaker-than-expected Q3?

Key takeaways:

• EPS rises to Rs. 0.87, up 21% YoY, but below street estimates
• Gross margins improve to 32% on a better power mix and fuel efficiency
• No dividend announced, in line with expectations

Fauji Cement Company Ltd. (FCCL) announced its financial results for 3QFY25, posting earnings of Rs. 2.14 billion (EPS: Rs. 0.87), marking a 21% year-on-year increase. While the result showed decent growth, it came in below industry expectations, primarily due to higher-than-expected finance costs and lower-than-anticipated gross margins.

The company did not announce any dividend for the quarter, which was largely in line with investor expectations.

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Gross margins improve, but QoQ pressure is evident

FCCL reported gross margins of 32% in 3QFY25, up from 28% in the same period last year. The YoY margin expansion was driven by higher domestic dispatches, a greater share of renewable energy in the power mix, and lower fuel costs. However, margins were down from 36% in 2QFY25, reflecting some cost pressures and price softness.

Revenue shows modest growth on yearly basis

Net sales increased just 1% YoY to Rs. 19.3 billion, as the impact of higher dispatches was largely offset by lower retention prices. On a quarter-on-quarter basis, revenue was down 22%, due to a decline in domestic sales volumes.

• Domestic dispatches: 1.15mn tons (↑4% YoY, ↓13% QoQ)
• Export dispatches: 0.04mn tons (↓53% YoY, ↓76% QoQ)

Operating profits and costs

• Operating profit stood at Rs. 4.95 billion, up 16% YoY but down 34% QoQ
• Distribution expenses dropped 8% YoY
• Finance costs declined 11% YoY to Rs. 1.46 billion, thanks to reduced borrowing and lower interest rates
• Other income dropped 29% YoY, contributing to the earnings miss

Higher taxation impacting net profit

Taxation increased to Rs. 1.35 billion (effective tax rate: 39%), up from 33% in the same quarter last year, further pressuring bottom-line growth.

Valuation snapshot

FCCL is trading at a forward P/E of 6.1x for FY26 and 5.3x for FY27, which may offer value if margins stabilize and volume growth continues.

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Source: Topline Securities (Private) Limited

⚠️ 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 →