MLCF_Developments augment value, (AKD Daily, Oct 29, 2020)
AKD Daily
MLCF: Developments augment value
- We update our estimates for Maple Leaf Cement Company. (MLCF), incorporating two major developments: i) improved liquidity on the backof deferred loans under SBP’s scheme coupled with improving working capital, and ii) recent announcement of extension in WHR capacity to 25MW from 16MW.
- In the wake of severe price competition between players, MLCF aggressively pushed product to market, offering discounts and extended credit lines which resulted in worsened working capital cycle (68 days for FY20). Moving forward, situation is expected to improve with working capital cycle expected at 35/30 for FY21/22 (32 days for 1QFY21).
- Company has announced increase in WHR capacity to 25MW from current 16MW. Expected to commence in 2QFY22, company will utilize SBP’s TERF to finance the project while cost saving from expansion in capacity is expected to lift EPS for FY22/23 by PkR0.20/0.23.
- Despite having second lowest cash cost of production from our universe, manageable debt burdens (D/E: 56% vs. 91% of AKD Cement Universe (Ex. LUCK and FCCL)) and earnings growth of 29% of for FY21-24, stock performing 19% during last ~3 weeks has resulted in a Neutral stance with our Jun’21 TP of PkR47.4/sh providing an upside of 11.2%. Buy on dips stance advised.
AKD Research
Maple Leaf Cement Factory is engaged in the production and sale of white cement, grey cement and clinker. Co. is a subsidiary of Kohinoor Textile Mills Limited.
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