This stock stands out in the cement sector based on expected earnings growth

Cementing the path forward

Pakistan’s cement sector has had a tough few years, but signs of a turnaround are beginning to show. After facing sluggish demand, high input costs, and tight financial conditions, the industry seems to be on more stable ground. While total cement dispatches fell for the fourth straight year in FY25, down 3% year-on-year, companies managed to protect their profits through smart pricing and cost-cutting strategies. Now, with interest rates expected to come down and demand gradually picking up, the stage is set for a recovery. Among all listed cement companies, Fauji Cement Company Limited (FCCL) stands out for delivering the most impressive earnings growth in FY25.

Sector overview: higher margins, better days ahead

Despite lower sales volumes in FY25, the cement industry successfully passed on rising costs such as higher federal excise duty (FED) and limestone royalties. This was made possible through strong pricing discipline across the sector. Looking forward, several tailwinds could support the industry: monetary easing is expected to boost construction demand, coal prices remain low, and companies are investing in energy efficiency and renewable power sources. These factors are likely to strengthen profit margins across the board.

Company overview: Fauji Cement (FCCL)

FCCL has shown strong financial performance during FY25, with a significant jump in both sales and earnings. For the last quarter of FY25 (April–June), FCCL is expected to post earnings of Rs1.37 per share, nearly 3x higher than the same quarter last year. This growth is largely driven by a 10% rise in cement dispatches, leading to a 10% increase in sales revenue, and a sharp 41% drop in finance costs, thanks to lower interest rates.

For the full fiscal year, FCCL’s earnings per share are projected at Rs5.21, a solid 55% increase over last year. The company’s gross profit also rose by 21% year-on-year, highlighting improved cost efficiency and stronger pricing. Notably, the company’s tax rate has normalized from an unusually high level last year, giving an added boost to net profit. Alongside these results, FCCL is also expected to announce a final dividend of Rs1.75 per share.

Financial snapshot

Why are analysts bullish on FCCL?

FCCL’s strong performance is driven by a combination of higher cement sales, lower borrowing costs, and improved cost control. The company has managed to grow profits even in a difficult demand environment, showing operational strength. As interest rates ease and construction activity picks up, FCCL is well positioned to benefit. Its consistent dividend payouts and margin expansion further strengthen investor confidence. A 55% jump in annual earnings is hard to ignore, especially when it’s supported by both top-line (sales) and bottom-line (profit) growth.

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Risks to watch

While the outlook is positive, there are a few risks that could affect FCCL’s performance. Any delay in the expected interest rate cuts could hurt financing cost relief. Construction demand recovery, while expected, may take longer than anticipated if macroeconomic conditions remain uncertain. Additionally, if fuel or raw material prices rise again, cost pressures could return. Finally, any policy changes in cement taxation or royalty structures could weigh on future margins.

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FCCL has emerged as a strong performer in a challenging year for cement companies. With a sharp rise in earnings, lower finance costs, and stable dividends, it stands out as the top pick in the sector based on FY25 earnings growth. As demand recovers and economic conditions improve, FCCL is one to watch closely.

⚠️ 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 →