Fauji Cement Company

Fauji Cement Company Limited (FCCL) is a publicly listed company at the Pakistan Stock Exchange (PSX). The principal activities of the company is manufacturing and sale of cement. The stock has a market cap of Rs28.62 billion and maintains 35 per cent free float of shares.

The company recorded a net profit of Rs5.07 billion in the first half of FY23, translating into an earnings per share (EPS) of Rs2.25 for the period ended December 2022.

Its net revenue clocked-in at Rs33.67 billion, i.e., approximately 33 per cent growth (YoY). The gross profit margins of the company were recorded at 27.68 per cent, despite cost pressures.

The company retained its profitability due to effective retention prices and efficient use of the energy mix. Due to high inflation, rising interest rates, rupee depreciation and lesser demand, the overall business environment has been tough for the cement sector and all costs centre have reported massive uptick. However, despite all the pressures, the second quarter saw betterment.

For the company, the dispatches went up 30 per cent (QoQ), as post-floods the demand has seen positive uptrend. The company is mostly relying on local coal and using better energy mix to keep the overall costs in line via substituting imported coal with the local or Afghan coal and the use of alternative fuels.

It has been notified that the company has achieved commercial operations at its new production line in Nizampur having clinker capacity of 6,500 tonnes/day. Further, the Greenfield expansion at D G Khan is expected to conclude at end of the current year.

Currently, the company maintains 29MW solar power, which is expected to reach 40MW by September 2023.

FCCL being major producer of Portland cement, which is used in the construction is likely to benefit from resumption of mega projects post-floods.

Further, the cement industry is likely to benefit from the fall in the international coal prices, which saw a significant decline in the last two months with as low as $134/tonne.

The decline is mainly due to the global economic slowdown, i.e., lesser demand and the resumption of exports from Indonesia, which is the largest coal exporter.

Further, the stock trades at a low PE of 3.1x, which reflects being undervalued.

The plant of Fauji Cement Company Limited (FCCL) is located at Jhang Bahtar, Attock district near Islamabad. The company is one of the leading producers of a wide range of quality cement, including ordinary Portland cement and other special cement(s) in Pakistan. Incorporated as a public limited company, it started its operations in 1997 with the production capacity of 3,000 tonnes/day, which was enhanced to over 3,700 tonnes/day in 2005.