KOHC Assessing Market Prices for Share Buyback
Staff Report :
The management of Kohat Cement (KOHC) is evaluating market prices before initiating the process of the share buyback.
The share buyback has not yet started, as management is evaluating market prices before initiating the process. KOHC is trading at a FY25/26F PE of 6.6x and 5.6x, respectively.KSE-100 Falls 283 Points Amid Volatility
Kohat Cement (KOHC) conducted its FY24 and 1QFY25 analyst briefing to discuss business performance and future outlook.
Regarding future projects, management communicated that an additional 10MW solar capacity is expected to be fully online by FY26, with 6MW completed by the end of 2QFY25. KOHC had already installed 10MW of solar capacity in FY24.
The board has approved the development of a 30MW coal-fired power plant, which is expected to be completed in 18 months. The development of a Greenfield cement production line is also in progress in Khushab. Rs700 million has already been spent, and the import of machinery will begin once the economic outlook improves.
Gross margins improved to 29.1% in FY24, compared to 26.8% in FY23. Similarly, margins improved to 42.8% in 1QFY25, compared to 29.2% in 1QFY24. Despite lower domestic dispatches, margins have improved due to higher retention prices, the solar plant coming online, and lower coal costs.
Other income for the company increased by 114% YoY in FY24 and 70% YoY in 1QFY25, mainly due to placements in mutual funds utilizing excess cash.
The average retention price for KOHC stood at Rs14.9k/ton in FY24, compared to Rs12.9k/ton in FY23. The average retention price for 1QFY25 stood at Rs17.0k/ton, compared to Rs14.5k/ton in 1QFY24. Higher retention prices reflect the impact of royalty disparity, with Punjab imposing a 6% royalty on ex-factory prices and KPK imposing Rs250/ton royalty.
Management believes that the royalty disparity is unlikely to continue, as KPK generally follows the budgetary measures of Punjab.
The average fuel mix for the company was 69/31% imported/local in 1QFY25, compared to 73/27% imported/local in 1QFY24. Average coal costs for KOHC were Rs44k/ton in FY24 and Rs42k/ton in 1QFY25.
The recent reduction in the duty on Afghan coal is expected to lower prices by Rs3,000-4,000/ton, according to management.
The power mix for the company was 66/34% captive/grid in 1QFY25, compared to 34/66% captive/grid in 1QFY24. This shift in power mix is due to the solar capacity coming online and higher generation through furnace oil (FO), where the fuel mix included 28% from FO.
KOHC has no gas engines, so it will not be impacted by higher gas prices. The current grid rate for the company is Rs40/kWh.
