FCCL Earnings Up 21% in 3QFY25

Staff Report:

FCCL announced its 3QFY25 result on Thursday, where the company recorded earnings of Rs2.1bn (EPS of Rs0.87), up by 21% YoY.

 The result came lower than industry expectations due to higher-than-expected finance costs and lower than expected gross margins.

 Alongside the result, the company did not announce any cash dividend in 3QFY25 which was according to expectations.

 Earnings increased by 21% YoY in 3QFY25 due to higher gross margins (32% vs. 28% in 3QFY24) and lower finance costs.

 Finance costs in 3QFY25 decreased by 11% YoY to Rs1.46bn mainly due to decrease in borrowings and lower interest rates.

 Company recorded gross margins of 32% in 3QFY25 compared to 36% in 2QFY25 and 28% in 3QFY24. Gross margins are higher on a YoY basis due to higher domestic dispatches, better power mix of renewables and lower fuel costs, we believe.

  Net Revenue increased by 1% YoY and decreased by 22% QoQ to Rs19.3bn in 3QFY25. Impact of higher YoY domestic dispatches was largely offset by lower retention prices, we believe. Net Revenue is lower on a QoQ basis mainly due to lower QoQ domestic dispatches.

 To recall, domestic dispatches for FCCL increased by 4% YoY and decreased by 13% QoQ to 1.15mn tons and export dispatches decreased by 53% YoY and by 76% QoQ to 0.04mn tons.

 Effective tax rate in 3QFY25 stood at 39% compared to 38% in 2QFY25 and 33% in 3QFY24.

 FCCL is currently trading at FY26/27F PE of 6.1x and 5.3x respectively.