Cement earnings likely to grow up 45pc in 2QFY21

KARACHI: The cement sector is all set to report up to 45 percent quarter-on-quarter (QoQ) growth in earnings to reach 10 quarters high levels during 2QFY21.
Despite an increase in coal prices, the gross margins are expected to increase led by cement prices during the said period. Pakistan cement sales during 2QFY21, touched all-time high quarterly sales of 15.1 million tons, up by 11 percent on both QoQ and YoY basis. During 1HFY21, sales increased by 16 percent YoY to 28.6 million tons.
According to the cement sector preview by Topline Securities, strong double-digit growth in dispatches can be attributed to economic recovery amidst low-interest rates, construction package, reallocation of banking sector liquidity towards construction and housing sector (last 3 month advances up by Rs 43bn) and work on the construction of dams.
During the outgoing quarter, coal prices surged to an average of US$60/ton (1.5months lag) compared to US$55/ton in 1QFY21. Resultantly, on average, the report expects the fuel cost per ton to increase by 10% QoQ. To pass on this price effect, northern players raised cement prices in Dec-2020 by ~Rs20/bag from Rs545-550/bag to Rs565-570/bag.
The research remained optimistic on the cement sector owing to progress on construction package, increased liquidity towards the sector, new additions in CPEC projects and relatively lower commodity prices (oil/coal).
As per the projections put forwarded in the report, LUCK’s consolidated earnings to grow by 158% YoY to Rs15.49/share in 2QFY21, wherein unconsolidated earnings are likely to come around Rs8.09/share (up 167% YoY). On a YoY basis, cement dispatches during the quarter are expected to go up by 27% YoY to 2.58 million tons. It is expected that KIA Lucky Motors, ICI and foreign operations to contribute Rs3.4/share, Rs1.86/share and Rs2.0/share during 2QFY21, respectively.
Kohat Cement is likely to post EPS of Rs3.34 in 2QFY21 vs. EPS of Rs0.05. The rise in earnings is on the back of 69% YoY jump in dispatches. Retention prices of the company are also likely to increase by Rs16/bag to Rs308/bag which may result in margin accretion.
In 2QFY21, Fauji Cement is expected to post EPS of Rs0.75 compared to EPS of Rs0.14 in 2QFY20. Volumetric sales of the company are likely to clock in at 0.91 million tons. Gross margins are estimated to increase by 6ppts QoQ and 21 ppts YoY to 28% in 2QFY21.
The brokerage house expects DGKC to post EPS of Rs1.68, up 27% YoY in 2QFY21. Dispatches are expected to grow more than 45% QoQ at 1.91 million tons, while gross margins are likely to clock in at 13.4%, up by 4ppts QoQ. Just like the previous quarter, dividend income from MCB will remain absent.
The report expects that Maple Leaf Cement consolidated EPS to see a sharp rebound and clock in at Rs0.82 in 2QFY21, compared to an LPS of Rs0.72 in 2QFY20. The volumetric sales of the company are expected to clock in at 1.28mn tons (down 22% YoY) with gross margins of 22% (up by 2.5ppts QoQ and 16.6ppts YoY). – TLTP