Pearl Securities Limited – Synopsis

Karachi, April 20, 2015 (PPI-OT): Declining exports and no significant improvement in domestic sales has likely increased competition in the northern cement market and kept revenue growth constrained. On the bright side, diminishing exports with maintained domestic sales will likely improve average retention price while power tariff reduction will support gross margins. In this report Pearl Securities Limited highlights Cherat Cement Limited (CHCC), holding an attractive P/E multiple of 9.0x. Pearl Securities Limited sets a FY15 TP of PKR 88, showing a fair upside of 10%.

3Q revenue to be subdued QoQ, growth expected YoY

Overall volumetric sales are expected to be lower than the previous quarter, however, will be significantly greater than the previous year. Pearl Securities Limited expects total volumetric sales of 252k Tons during 3Q FY15, which is lower by 3% QoQ, however, greater by 3% against sales of 244k Tons in the same quarter last year. Revenue for 3Q FY15 is expected to clock in around PKR 1.76bn, at the same level as the previous quarter, however, greater by 15% YoY against PKR 1.53bn in the corresponding term last year. In yearly comparison, revenue is expected to be greater due to 3% increase in volumetric sales coupled by 11% YoY improvement in average retention price. Moving forward, Pearl Securities Limited expects better volumes and consequently revenue growth in the final quarter.