Despite being a small fish in a big pond- having one percent market share per its 450,000 million tons of production capacity- Thatta cement has demonstrated strong perseverance in its top line and improving margins, trying to bring them at par with other more grounded players. There is still however, a lot more growth to be had.

The company posted a 24 percent bump in its net sales clocking at Rs2.8 billion and a 112 percent in its net profit reaching Rs0.6 billion in FY16. Distribution, finance and administrative costs all went up while other income in this period had a 19 percent contribution to the bottom line. A final cash dividend is also offered of Rs1.5 per share (15%).

Cost of sales went up by 17 percent which could potentially be concerning. The company has its own power subsidiary Thatta Power (TPPL) that provides electricity to TCCL so the cost of goods should be compressing further. Whereas in FY14, power and fuel contributed to 61 percent of the total cost of sales; it was brought down to 48 percent in FY15. It is likely that power costs have remained the same or even higher in FY16. A new WHR for 5MW is currently in the works which may cut down costs in the coming year.

Yes, TCCL's margins have gone up from 28 percent in FY15 to 32 percent in FY16 but not nearly as faster or closer to other players. In the past two weeks, three results for FY16 have come out reflecting a fall in cost of sales in the outgoing fiscal: Attock (margins: 34% to 40%), Cherat (margins: 30% to 37%) and Gharibwal (margins: 31% to 40%) showing a 4 percent, 3 percent and 4 percent decrease respectively.

One of the areas where Thatta could shine is the diversification of its product line. It produces Ground Granulated Blast Furnace Slag (GGBF) which is used in blending and Class G Oil Well cement, for which the company has an international certification by the American Petroleum Institute (API). The latter is used by oil and gas exploration companies and TCCL is the only Pakistani company that can market its product to countries that use this variety of cement for the construction and drilling of oil wells.

So far the company has only sold both these varieties locally. GBFS sales have grown from 4,000 tons to 34,000 tons in the past six years and Oil Well cement has only had moderate growth. But more variety makes for better opportunities.

The company also ran a BMR to improve efficiency by converting the cement production system to pyro-process, a welcome more environmentally friendly step which will likely pay off in the long run.

There was news in 2010 that the company might expand from its 1,500 tons per day to 3,000 tons per day but the expansion never materialized. Perhaps TCCL should revisit the idea as it is enjoying a healthy profit with strong margins and every other player in the cement sector is expanding keeping in mind the domestic demand that will come on in the next few years.