Standard Capital Securities (Pvt) Ltd
Pioneer Cement (PIOC) is known for plant efficiency over the years. PIOC operates with the production capacity of 1.93 mn tons per annum. However, utilization levels depend upon the local cement bags demand.
PIOC announced its financial results for 1QFY15 wherein they posted an EPS of Rs 1.90/sh, which shows an increase of 17% compared to the same period last year.
- Sales increased by 7% in 1QFY15; top line reached Rs2bn mark
- Gross margin in 1QFY15 stood at 37%; w
- PAT increased by 17% which ultimately yielded EPS of 1.90/sh;
- Finance cost declined significantly due to repayments of debts to Asian
Development Bank (ABD);
Operating triggers: utilization + WHR
- The capacity utilization stood at 49.2% in FY15. In 1QFY16 with the production of 0.29mn tonsregistering an increase of 7% compared to the same period last year, given immense capacity to produce more of the cement;
- The sales volume stood at 0.29mn tons which is an increase of 6.3% compared to the same period last year;
- Cement is in demand in local market where the export of the cement is hurt in the last couple of years given lessening demand from UAE and Afghanistan. The sales volume in local market increased by 10.1% compared to last year where the export faces depressing demand and decline by 36% YoY;
- Installation of Waste Heat Recovery (WHR) plant will help in controlling costs which will be reflected on improved margins;
PIOC yields FY16 PE & EVEBITDA of 7.4x & 5.9x respectively, which is low versus peers. Our PIOC FY16 EPS forecast is relegated to Rs11.5/sh based on present utilization rate. PIOC is known for passing on cash dividends (expected cash yield: 7%).