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KOHC – Earnings meet expectations




Elixir Securities Pakistan (Pvt.) Limited


01 Nov 2013





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Result announcement Kohat Cement Company Limited (KOHC) announced its 1QFY14 financial results on 28th October 2013. The company posted EPS of PKR3.99, up 29% YoY but down 15% QoQ, in line with our expectations. Dispatch growth outpaces industry KOHC posted total dispatches of 0.41mn tons during 1QFY14, up 15% YoY. Local dispatches clocked in at 0.33mn tons during the period, up 21% YoY and significantly higher than industry growth of 2%. In addition to this, exports also remained strong, clocking in at 0.08mn tons during 1QFY14, up 3% YoY against industry contraction of 2%. Strong margins sustain in 1Q KOHC posted EBITDA margin of PKR129/bag during 1QFY14, up 18% YoY and 4% QoQ. COGS clocked in at PKR200/bag during the period, up by only 4% QoQ, owing to PESCO’s unchanged power tariff. KOHC’s average retention clocked in at PKR323/bag, up 4% QoQ. Though export retention remained on the lower side due to unstable prices in Afghanistan, retention on local dispatches largely contributed to average retention growth. Export retention clocked in at PKR314/bag (USD62/ton), down 2% QoQ while retention on local dispatches clocked in at PKR332/bag, up 2% QoQ. Lower tax rate supported bottom-line Profit before tax (PBT) came out in line with our expectations, however, lower tax rate during 1QFY14 further boosted bottom-line. Effective tax rate for 1QFY14 clocked in at 30% against our expectation of 32%. Investment perspective KOHC is currently trading at FY14 PER of 4.3x. Our Jun-14 price target of PKR125/share offers an upside of 57% along with a dividend yield of 6%. Strong fundamentals with attractive valuation make KOHC one of our top picks in the cement space. BUY!

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