March 5, 2020 (MLN): The past 12 months have been the rough patch for Maple Leaf Cement Factory Limited (MLCF) as the mounting financial charges, stumbling margins and the recent rights issue to support balance sheet have emerged as a bummer for the company’s profitability.
However, a report by HFG Hermes says the one important factor that distinguishes Maple from its peers, which market is ignoring was the improved efficiency as its coal power plant leads to minimal dependence on the grid and is the cheapest source after WHRP.
In addition to this, its new power plant consumes less power and fuel with increased usage of pet coke which is more efficient.
The report regards this as a major competitive advantage that Maple enjoys over its peers and better efficiency will make its margin recovery faster. Additionally, the report foresees Maple’s penetration in the domestic market will prove useful once pricing stability is restored.
During 1HFY20, Maple’s dispatches witnessed a significant growth of 76%YoY as the company’s expansion in April 2019 has started paying off, however, weaker prices have contained Company’s revenue growth, the report said.
Since the cement prices are likely to remain subdued over the next few quarters, the cement players will eventually achieve pricing consensus as the majority of expansions are online, thus players are almost done with their respective honeymoon period; secondly, these low cement prices have hurt everyone and undercutting cannot sustain in the long term, the report underscored.
As the company has already achieved uptick in dispatches, the improved pricing would drive company’s revenue growth going forward.
