Maple Leaf Cement Our top pick in the cement sector We preview 4QFY14 results for MLCF, where we expect the company to report net earnings of PKR1.26bn (EPS: PKR2.39), registering a significant growth of 36% QoQ. Such a remarkable Improvement in the bottom-line is primarily on the back of, 1) expected improvement of 8.8% QoQ in the top-line of the company owing to both higher local & export dispatches and 2) augmenting gross margins which are likely to clock in at a decent levels of 39.3% in 4QFY14 as compared to 32.2% in 3QFY14 due to dip in international coal prices and strengthening of PKR against USD. Cumulatively, FY14 net earnings are estimated to settle down at PKR3.76bn, translating into an EPS of PKR6.96, (up 14% YoY). Recent acquisition of LPCL by Bestway Cement Limited (BWCL) and news of International Trade Administration Commission of South Africa accepting an application raised by the South African local cement makers against Pakistani cement exporters is likely to keep be sector under pressure. FY15TD local cement prices have remained stable, but the risk of price decline does remain. A reduction of PKR25/50kg bag is expected to curtail MLCFs forecasted FY15 EPS of PKR8.25 to PKR7.01, whereas reduction of PKR50/5okg bag is expected to end up with an EPS of PKR5.76. MLCF is our top pick in the cement universe due to trough valuation. At current price, the scrip is offering an attractive upside potential of 68% and is trading at a FY15 P/E of 3.1x. BUY maintained! Research Taurus Securities Limited
Posted on: Thu, 28 Aug 2014 06:35:18 +0000