Pakistan Cement: Coal prices creating some room to breathe, (AKD Daily, Aug 16, 2019)
- Coal prices stand at USD60/ton after touching a three year low of USD59.7/ton as intensifying trade war between China-US and fears of recession across the globe put significant pressure on the prices.
- The decline serves as a sigh of relief for local players where declining local prices significantly dented the profitability for FY19. LUCK being the least sensitive stands to gain the least while CHCC and PIOC have the most to rejoice.
- The current downturn is expected to be relatively different from 1HCY19 where PkR depreciation worn out the benefits of decline in coal prices however with expected depreciation already incorporated in our base case, we believe sustaining the current levels will be beneficial for local players.
- An axe in the shape of declining local cement prices in North can cut off more than the gains with some players providing significant discounts where upcoming capacities will further increase pressure on prices.
- We maintain our underweight stance on the sector with PIOC (TP: PkR17.3/sh) as our top sell with the company being heavily leveraged (FY20E D/E: 152%) and most sensitive to changing dynamics.
AKD Research
Co. is engaged in the manufacturing and marketing of cement and clinker.
AKD Securities Ltd. is one of the leading securities firm in Pakistan, providing a comprehensive range of investor focused services, including equity brokerage, economic and securities research, investment banking and financial advisory services. AKD Securities accounts for more than 6% of the average daily value of the Karachi Stock Exchange. AKD Securities was the first brokerage house to launch an online trading platform in Pakistan in November 2002 and now has the largest market share with over 6000 customers. This has helped diversify and expand the retail investor base in the country and ushered in a whole new universe of investors to the stock market.
AKD Securities Ltd. caters to a diversified group of domestic and international institutional investors, high net worth individuals and upscale retail clients, including expatriate Pakistanis. With high quality research, unparalleled execution and distribution capability for both regular and large block trades, AKD Securities Ltd. has earned an outstanding reputation in the Pakistani securities industry.Outside of commercial banks, AKD Securities Ltd. is one of the biggest capital market firms in the country. AKD Securities is the leader in raising and providing risk capital in underwriting, market making and mergers and acquisitions in Pakistan. Good corporate governance and professionalism are emphasized throughout the firm and AKD Securities Ltd. is amongst the very few companies to have introduced a firm-wide comprehensive CODE of ETHICS, overseen by an independent compliance manager.Ultimately, our success is based on the quality of service we provide to our customers and the trust and confidence reposed in us by them. Our focus, therefore, remains on customer satisfaction at all levels in the company.
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