Intermarket Pulse: CHCC: Upgraded to Neutral on better earnings outlook
​We upgrade our stance on Cherat Cement (CHCC) from Sell to Neutral with a revised TP of PkR174/sh. Our new target price is based on revised EPS estimates of PkR13.56/PkR19.51/PkR21.43 for FY17/18/19F (up 7%/20%/15%) from previous estimates.
Our revised estimates are based on better-than-expected dispatches outlook (5 year total dispatches CAGR of 15%) and better ability of passing-on of increasing coal prices. While dispatches momentum for CHCC may outpace industry, it may see earnings decline from FY20F – decline in market share post commencement of new capacities from end of FY19F.
The 36% FYTD rally has already placed CHCC at the upper end of the sector’s valuations. CHCC is currently trading at FY17/18F P/E of 11.9/8.3x (marginal 7% discount to the sector based on FY18F EPS), offering total return of 10%.
Co. is engaged in the manufacturing and marketing of cement and clinker.
Intermarket Securities Limited (IMS) is a full service corporate brokerage firm based in Karachi, Pakistan. We service both domestic and international clients. IMS was ranked #2 Best Local Brokerage and #3 Best for Overall Country Research for 2016 by AsiaMoney.
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