EUR 4.36 For Business Accounts Only

Intermarket Pulse: CHCC: Remain Neutral as medium-term outlook warrants caution

• We maintain our Neutral stance on CHCC with a new TP of PRs140/sh (rolled over to Jun’19). Our new FY18/19/20F EPS estimates are PRs12.61/14.74/19.97 on the back of improved volumes in 1HFY18 and tax credits from latest expansion (Line II).
• CHCC’s second expansion (Line III) should improve the capacity share and hence volumes outlook in years ahead. However, we flag that CHCC is one of the most sensitive to industry price changes. Given its heavy debt burden for the two expansions, any disruption in industry pricing discipline could dent profitability significantly.
• The second expansion is progressing on schedule, where the company is targeting COD of 2.1mn brownfield project in Jun’19. As of Dec’17, the company had invested PRs4.1bn in the project, while the total cost of the expansion amounts to PRs13.5bn. CHCC is trading at FY18F EV/EBITDA of 7.7x, at an 11% premium to our Cement Universe.