In our today’s morning report we would discuss the performance of Kohat Cement Company Limited (KOHC) in 1HFY16.

Profitability massively up by 54%: Kohat cement recorded 54% of impressive growth YoY in its earnings as its profit rose to Rs 2.10 billion (EPS: Rs 13.60) in 1HFY16 compared to a PAT of Rs 1.36 billion (EPS: Rs 8.84) in 1HFY15. The factors contributed to this growth can be summed up as 1) higher dispatches, 2) lower coal prices, 3) hike in other income and 4) reduction in financing cost.

QoQ also impressive: In 2QFY16, company witnessed 22% QoQ growth in bottom line with profit after taxation of Rs 1,156 million (EPS: Rs 7.48) as against Rs 946 million (EPS: Rs 6.12) in 1QFY16 mainly due to 18% QoQ hike in cement dispatches and decline in fuel cost. Furthermore, company announce cash dividend of Rs 5/share.

Higher revenues – the key driver: Net sales of the company surge by 20% YoY in 1HFY16 owing to better volumetric sales and stable cement prices domestically. The net sales reached at Rs 7.06 billion in 1HFY16 versus Rs 5.90 billion in 1HFY15. During the period mentioned, volumetric sales up by 19% to 1,038k tons versus 868k tons in 1HFY15 mainly driven by higher local sales which rose by 27% to 932k tons against 735k tons in 1HFY15. However, exports numbers remain gloomy and declined by 21% to 106k tons compared to 134k tons in same period last fiscal due to lower demand in Afghanistan. Gross profit hike by 52% to Rs 3.09 billion compared to Rs 2.03 billion in 1HFY15 mainly due to lower cost of sales on account of lower coal prices. Gross margin increase to 43.8% in 1HFY16 as compared to 34.4% recorded in 1HFY15.

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By: Azee Securities Private Limited