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GWLC - FY23 Analyst Briefing Takeaways, (AKD Off the Analyst's Desk Nov 24, 2023)

AKD, Off the Analyst's Desk

GWLC - FY23 Analyst Briefing Takeaways

Gharibwal Cement Ltd (GWLC) held its corporate briefing earlier today to apprise investors on their FY23 financial results and future outlook of the company. Following are the key highlights of the call:

 

• To recall, company posted earnings of PkR3.1/sh in FY23 vs. PkR3.4/sh in the previous year where the decline was primarily because of gross margins’ contraction.
• Average selling price of cement surged to PkR13.6k/ton in FY23 from the previous year's PkR9.6k/ton. This upward trend continued into 1QFY24, with prices reaching PkR14.6k/ton. Management apprised that cement pieces have further increased by PkR80/bag recently, amid the implementation of the axle load limit. This adjustment has led to retention prices exceeding PkR15k/ton.
• On the axle load implementation, the transportation limit for coal and cement has been significantly reduced, with coal trucks from 50-55tons to 30tons, and cement from 700tons/vehicle to 340tons/vehicle. This has nearly doubled the transportation cost.
• Fuel mix for FY23 comprised 20% local, 58% Afghan, and 22% imported coal, with a weighted average coal price of PkR48k/ton. Currently, the coal mix stands at 25% local, with the remainder being a mix of Afghan and imported coal.
• Previously, the price of Afghan coal was PkR52k/ton, and local (Darra) coal was PkR43k/ton. These prices are expected to increase by PkR2k/ton, aligning with the rise in transportation costs due to the axle load limit. Additionally, the freight cost from the South to the company's location now stands at PkR13k/ton.
• On the power front, the mix for FY23 was 50% WHR & CFP (coal-fired power), 31% Grid, 19% HFO (Furnace oil), and 0% gas, with an average price of PkR23/kWh. As per management, the grid price is PkR37-40/kWh, and the company reliance on grid during peak hours remains minimal.
• Going forward, management expects the growth of the industry to be flat for FY24, with a more optimistic outlook for the following year.
• Management has informed that negotiations with vendors for a 10MW solar project are currently underway. And execution of the project is anticipated to commence by the end of FY23. The estimated cost of this project is PkR1.0bn, and it will be entirely financed by equity.
• Furthermore, for the BMR of the existing line, shipments have arrived, and the plant is expected to undergo a shutdown by the end of this year. The BMR is slated to complete in 1QFY25, resulting in an increased plant capacity from 2.01mn TPA to 2.25mn TPA. Moreover, the capacity to use local coal is anticipated to rise to 40%.
• Similarly, a 10MW multi-fuel-based power project is in the pipeline. The turbine for the project has already been procured, and the boiler is in the technical design phase. The project is designed to run on local coal and alternative fuel, with an estimated boiler cost ranging from ~PkR0.5-1.0bn.
• On the brownfield expansion of 3mn TPA, management stated that the pyro machinery has been received, and civil work for the project is in progress. Further procurement of machinery is under review, and company plans to proceed with project completion when the economic situation improves.
• As per management, the timeline and the exact remaining cost of the project will be disclosed after final negotiations with the vendor. Meanwhile, the rough estimate stands at PkR18-20bn.

 

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