Intermarket Pulse: KOHC: Raise TP on incorporation of expansion; Buy
- We reiterate our Buy stance on KOHC and raise our Jun’18 TP to PRs245/sh, up 29% from our previous TP of PRs190/sh, on account of 7800tpd brownfield expansion expected to come online in Mar’20. As per management, the expansion is being carried out as per schedule and we now incorporate in our estimates.
- A cash-rich balance sheet (PRs63/sh in cash & investments) limits downside risk for the company, which will have less debt burden than peers if industry dynamics become tough. Resolution of grinding capacity constraints and a potential installation of WHR will likely sustain earnings growth even if cement prices are soft.
- KOHC’s cheapest valuations (EV/ton of US$59 vs cement sector average of US$82) make it the most attractive in IMS cement universe. Recent industry price increases took advantage of a buoyant demand season; however, the scenario following DGKC’s expansion in the next two months will determine the true pricing dynamics, in our view.
Kohat Cement Company Limited. Kohat Cement Company Limited is a Pakistan-based company, which is engaged in the production and sale of cement. The Company's products include Grey Cement and White Cement. The Company offers Ordinary Portland Grey Cement under the brand name KOHAT CEMENT. The Company produces and sells White Portland Cement under the brand name KOHAT SUPER WHITE. The Company also offers white canvas for various architectural applications. The Company's white canvas is used for concreting and ornamental applications, terrazzo floorings, fixing of tiles and marbles, and others. The Company's White Portland Cement is available in all local markets in Pakistan and Afghanistan. The Company has an annual production capacity of 2.8 million tons of Grey Cement and 150,000 tons of White Cement. The Company produces both Grey and White Cements at its plants located in Rawalpindi Road, Kohat.
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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