Morning Briefing for April 21, 2014 – Standard Capital

Karachi, April 21, 2014 (PPI-OT): Maple Leaf Cement – Hidden jewel!!


Standard Capital initiates Standard Capital Limited’s coverage in MLCF, having capacity of 3.36mn tons – utilization capacity FY14E 83% (FY13: 81%). Standard Capital has forecasted FY14 EPS of Rs 6.65/sh deciphering PE of 4.47x. Standard Capital Limited’s thrust of increase in EPS is due to swelling sales price of cement bag in FY14 and employing noticeable cost reduction techniques.

Key Ratios FY13 FY14 E
EPS 6.11 6.65
P/E 4.9 4.5
BVS 22.40 31.89
PBV 1.3 0.9
ROA 10.0% 17.1%

9MFY14 performance to be sanguine despite lean period overall

MLCF attained dispatches of 1.8mn tons which was a bit leaner show as against last year but the advantage is in retention prices. Like any cement plant in the country MLCF is a price sensitive model.

Standard Capital expects EPS of Rs 4.45 during 9MFY14 given Standard Capital Limited’s thrust of increase in overall sales revenue to Rs 11.33bn thus depicting nearly 10% y-o-y growth. MLCF margins have increased in the given period. The 3Q remains slow especially in business zones of Punjab and KPK due to fog on major carriageways which restricts movements for at least 15 days. Hence Standard Capital sees robust 4Q on the cards given greater demand.

000 tons 9MFY13 9MFY14E Chg
Local sales 1,452.33 1,483.91 2.2%
Export sales 434.18 379.52 -12.6%
Total 1,886.51 1,863.43 -1.2%

9MFY13 P and L
Rs mn 9MFY13 9MFY14E Chg
Net local sales 10,316.82 11,331.13 9.8%
Export sales 2,388.01 2,087.38 -12.6%
Net Sales 12,704.84 13,418.51 5.6%
Gross Profit 4,285.20 4,639.44 8.3%
Net Profit 2,197.22 2,348.24 6.9%
EPS (Rs /sh) 4.16 4.45 7.0%

Cement Association and Research Deptt.

Margins increased – MLCF in line with Industry

MLCF capacity play

000 tons FY13 FY14
Capacity 3,360 3,360
Capacity utilization 81% 83%

Research Deptt.

Already Standard Capital sees that companies in Northern Zone got benefit of resounding increase in retention prices i.e. 14% as per Standard Capital Limited’s estimation from last year.

Overall Standard Capital would continue to see advantage in local sales since export sales continued to have little charm in terms of margins. Increase in local price of cement will appreciate the retention price to Rs. 400 per 50 kg bag.

MLCF won’t mind decrease in export sales since it could have resulted in exchange loss in recent times given Dollar decline vis-à-vis PKR. GP margin and NP margin will appreciate by 1% to 35% and 18% respectively from last year.

Valuation | PE of 4.5x lower than peers FCCL and DGKC

MLCF deciphers FY14E PE of 4.5x based on Standard Capital Limited’s thrust of Rs 6.65/sh – which is quite lower than peers such as FCCL 7x, DGKC 6.4x – Standard Capital recommends BUY in Standard Capital Limited’s first call over MLCF.

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