Bestway Cement Limited – Corporate Briefing Notes Sep 2023

Research Team

Table of Contents

In FY23, the BWCL’s profitability showed a strong 16% YoY increase, reaching PKR 11.9 billion (with an EPS of PKR 19.94), compared to PKR 10.2 billion (with an EPS of PKR 17.17) in the previous year. The Company’s net turnover was reported at PKR 87.7 billion, reflecting a substantial 21% YoY growth, compared to PKR 72.4 billion in the preceding year.

Cost of sales and per ton cost increased by 22% YoY and 46% YoY, respectively, in FY23. Similarly, finance costs increased by 361% YoY due to higher interest rate and borrowings for the projects. Despite these challenges, the company reported robust gross and operating profits of PKR 27.3 billion (a 19% YoY increase) and PKR 24.3 billion (a 27% YoY increase), respectively, in FY23.

Furthermore, the gross profit margin and net profit margin decreased to 31% and 14%, respectively, while the interest coverage ratio declined to 4.31% in FY23, down from 14.57% in SPLY. However, Return on Equity (ROE) increased to 19.23% in FY23, compared to 16.46% in the previous year.

Total cement and Xtreme bond dispatches declined by 16% YoY, totaling 6.5MT in FY23, as opposed to 7.8MT in SPLY. In the domestic north region, total dispatches witnessed a 16% YoY increase, while exports surged by 34% YoY during the same period.

In FY23, the Company successfully added two production lines with a capacity of 7,200 TPD clinker in Mianwali and Hattar, incurring an estimated total cost of PKR 66 billion, with an additional PKR 4 billion expected to be spent this year, bringing the total cost to PKR 70 billion.

Additionally, management highlighted the expansion of solar power generation to 90MW in FY23. The current retention was reported at PKR 1200 in the north region.

With 52% of its power generation coming from internal sources, BWCL’s current power mix includes Grid (46%), WHRPP (28%), Solar (22%), and CFB (4%).

The Company is utilizing 60% Afghan coal and 40% local coal. The market share of BWCL declined to 15% in FY23 from 16% in SPLY.

Going forward, management acknowledged the political and economic challenges and emphasized the need for structural reforms to ensure the long-term progress of the country. However, the Company expects dispatches to improve marginally in FY24 based on improvements in demand observed in the last two months.

Moreover, BWCL plans to add an additional 7MW to its solar power generation capacity, reaching 97MW in FY24. The current capacity utilization stands at 54%, down from 73% last year, with a target of approximately 60% for the coming year, according to management.

BWCL is likely to remain cautious about making further investments in the next year. However, any investment in UBL will be carefully evaluated as part of the project’s due diligence process.

Important Disclosures

Disclaimer: This report has been prepared by Chase Securities Pakistan (Private) Limited and is provided for information purposes only. Under no circumstances, this is to be used or considered as an offer to sell or solicitation or any offer to buy. While reasonable care has been taken to ensure that the information contained in this report is not untrue or misleading at the time of its publication, Chase Securities makes no representation as to its accuracy or completeness and it should not be relied upon as such. From time to time, Chase Securities and/or any of its officers or directors may, as permitted by applicable laws, have a position, or otherwise be interested in any transaction, in any securities directly or indirectly subject of this report Chase Securities as a firm may have business relationships, including investment banking relationships with the companies referred to in this report This report is provided only for the information of professional advisers who are expected to make their own investment decisions without undue reliance on this report and Chase Securities accepts no responsibility whatsoever for any direct or indirect consequential loss arising from any use of this report or its contents At the same time, it should be noted that investments in capital markets are also subject to market risks This report may not be reproduced, distributed or published by any recipient for any purpose.

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