• Fauji Cement Company Limited board is scheduled to meet on Apr 27’14 to announce its 3QFY15 results. We expect the company to post PAT of PkR990mn (EPS: PkR0.74) in 3QFY15, up 33%YoY compared to PkR745mn (EPS: PkR0.56) in 3QFY14. Whereas, EPS is likely to clock in at PkR2.0, up 33%YoY in 9MFY15.
  • The profitability drivers include i) improvement in local sales (up 6%YoY) ii) lower international coal prices and oil prices and iii) lower finance cost.
  • On QoQ basis earnings are expected to decline by 7% due to lower dispatches in 3Q.
  • Going forward, we highlight commencement of operation of FCCL’s 10MW WHR plant is to augment savings in 4Q. On an annualized basis, it would improve earnings by 10%.
  • At current levels, we have a HOLD call with TP of PkR36/sh.

Higher Local Sales to Enlighten Earnings, GMs up to 39% Topline of the company is expected to increase by 4%YoY to PkR4.45bn on the back of enhanced local dispatches (up 6%YoY) during the 3Q. The company being entirely on grid has generated significant savings in lieu of declining tariff adjustments which coupled with the lower coal prices is expected to result in significant accretion in margins. We expect the company’s margins to propel by 458bps to 39% during the 3Q. Local sales increase to 91% during the quarter vs. 87% in SPLY is to further supplement the growth in margins. Finance costs are likely to decline by 11%YoY providing further support to the bottomline. Subsequently, we foresee NPAT to post PkR990mn (EPS 0.74), up 33%. On 9MFY15, NPAT is expected to clock in at PkR2.66bn (EPS 2.0), up 33%YoY. On a sequential basis, earnings are down 7% due to lower exports in the 3Q.

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