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OGDC & CHCC - 3QFY23 Result Previews, (AKD Daily, Apr 20, 2023)

OGDC to report earnings of PkR 13.56/sh for 3QFY23: Oil & Gas Development Company Limited (OGDC) is scheduled to release its 3QFY23 earnings on 27th April, wherein we expect the company to post NPAT of PkR58.3bn (EPS PkR13.56), up by 40%/35% on a QoQ/YoY basis. The said increase in bottom line is majorly due to sharp currency appreciation during the quarter (USD/PkR: ↑17%), inducing higher topline by 8.3%QoQ/18%YoY to stand at PkR105.3bn for the period (2QFY23: PkR97.2bn). On the hydrocarbon production front, oil and gas production remained down by 12%/8%YoY, as major fields such as Nashpa (↓13%YoY), Chanda (↓16%YoY), Uch (↓10%YoY) and TAL Block (↓7%YoY) remained down either due to natural depletion or demand constraints on SNGPL/WAPDA’s end. On the non-operating front, we expect company to incur positive finance income of PkR35.3bn (up 2.8xQoQ) majorly due to exchange gains of PkR24bn (last quarter: -ve PkR1.9bn) and higher income on short term investments during to increased benchmark rates. Furthermore, we expect company to incur dry well expenses of PkR2.25bn during the period, majorly on account of Bhambhra-2 (OGDCL stake: 100%), taking total exploration expenses to end the quarter at PkR5.4bn (up 7.2%QoQ). Alongside the earnings, we expect the company to announce a cash dividend of PkR1.75/sh. We have a Buy rating on the stock, with a Dec’23 TP of PkR123/sh, representing an upside potential of 42% from last close.

 

CHCC- Earnings to clock in at PkR6.5/sh in 3QFY23: Cherat Cement Company Limited (CHCC) is scheduled to announce its 3QFY23 result on April 27, wherein we expect company to post NPAT of PkR1.3bn (EPS: PKR6.5) vs. earnings of PkR8.0/5.5/sh in 2QFY23/SPLY, a decline of 19%QoQ while an increase of 18%YoY. This quarterly decline is majorly attributable to fallen cement offtakes of the company, which remained down by 13%QoQ. Furthermore, we expect gross margins to remain flat on a QoQ basis to settle at 28.6% for the period vs. 28.7% last quarter. Overall, the effect of higher prices of Afghan coal (up ~5%QoQ) during the period (coal mix: 80-90%) was majorly offset by cheaper power availability due to gas supply redemption (50-60% of the power mix) post the winter season in North. Finally, we expect company's finance cost to remain flat on quarterly basis despite rising benchmark rates, majorly due to lower borrowing amidst healthy cash generation during the nine months. All in all, 9MFY23 earnings are expected to cumulate to PkR4.3bn (EPS: PkR22.1) vs. PkR3.4bn (EPS: PkR17.7) in SPLY, an increase of 25%YoY.