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FCCL, CHCC, MUGHAL & ISL 1QFY24 Result Previews, (AKD Daily Oct 23, 2023)

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FCCL CHCC MUGHAL &  ISL  1QFY24 Result Previews

 

FCCL—1QFY24 EPS of PkR0.93 expected: The board of FCCL is scheduled to announce its 1QFY24 results tomorrow, where we expect the company to post a Profit after Tax of PkR2.3bn (EPS: PkR0.93) vs. PAT of PkR472mn (EPS: PkR0.19) in 4QCY23, an increase of 3.8xQoQ. The surge in the bottom line is primarily attributed to a lower tax charge during the quarter, with the previous quarter reflecting the retrospective impact of a super tax charge. Topline is expected to witness a 27%QoQ increase, reaching PkR20.5bn, where growth is majorly attributable to a 20% quarterly increase in the sales volumes (expected sales volumes 1QFY24: 1.34mn tons vs. 1.12mn tons in the previous quarter). Gross margins are anticipated to be 30.1% during the quarter vs. 39.3% in 4QCY23, wherein last quarter's margins were high due to the reclassification of freight charges from COGS to Distribution cost. Furthermore, finance cost are expected to be at PkR1.2bn (↑6%QoQ) during the period, driven by higher borrowings and effective interest rates.

 

CHCC– 1QFY24 earnings to clock in at PkR6.7/sh: CHCC is expected to announce its 1QFY24 earnings today, wherein we expect company to post NPAT of PkR1.3bn (EPS: PkR6.7) vs. EPS of PkR0.5/7.6 in 4QFY23/SPLY, changing by +13x/-12% QoQ/YoY. This quarterly increase in earnings is attributed to improved gross margins and a lower effective tax rate. The company's topline is expected to clock in at PkR10.1bn (↑17%/12% QoQ/YoY), where QoQ increase is driven by a 7.6%/6.6% quarterly rise in the sales volumes and retention price, respectively. Furthermore, gross margins are expected to settle at 28.4% vs. 21.4% in the previous quarter, primarily due to lower costs of coal during the period. Additionally, finance cost is expected to remain flat QoQ, reaching PkR500mn, where the increase in effective interest rates are largely offsetted by lower borrowings.

 

MUGHAL-EPS of PkR3.34 expected for 1QFY24: Mughal is expected to announce its 1QFY24 results on 27th October, wherein we expect the company to report earnings of PkR1.1bn (EPS: PkR3.34), compared to PkR834mn (EPS: PkR2.48) in the previous quarter, increasing by 35%/29% on a QoQ/YoY basis. The aforementioned increase in PAT is largely attributable higher offtakes amidst recovery in complementary indicators i.e. cement sales, steel imports and uptick in LSM activity. Furthermore, absence of retrospective super tax compared to the quarter before also has a hand in the said recovery of earnings during the period. On the volumetric front, we assume a growth of 10-12% in total volumes amidst relatively stable rebar prices PkR275k/ton during the outgoing quarter (largely unchanged vs. 4QFY23). On the non-operating front, we expect finance costs to amount to PkR1.45bn, down by 4% in the quarter before. The company currently trades at FY24 P/Ex of 4.75x with our TP of PkR80/sh, providing a capital upside of 38% from the last close – BUY.

  

ISL-EPS of PkR2.56 expected for 1QFY24: ISL is expected to announce its 1QFY24 tomorrow, where we expect the company to report earnings of PkR1.11bn (EPS: PkR2.56), compared to PkR1.94bn (EPS: PkR4.46) in the quarter before, decreasing by 45% on a QoQ basis but increasing by 139%YoY. The said decline is primarily attributed to the normalization of gross margins, expected to be around 14.9% during the period, in contrast to exceptionally high margins of 23.6% during the quarter before (4QFY23). Overall, higher power tariffs following base tariff revisions during July'23, coupled with slight uptick in 2/3 wheeler sales and the LSM index commends us to assume 5-7% increase in company's offtake. On the non-operating front, finance costs are expected to clock in at PkR383mn, down 56%YoY, largely due to company’s proactive measures to deleverage itself. To note, total borrowings stood at PkR4.7bn as per latest financials (down 77%YoY vs. PkR20.1bn in FY22). On the taxation front, effective taxes are expected to clock in at ~30% vs. 37.5% in the quarter before, lower amidst the absence of retrospective super tax implementation.

 

 

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