Pakistan Cement: High leverage may sink the ship, (AKD Daily, Oct 18, 2019)
- AKD Cement universes’ profitability is expected to tread into negative territory for 1QFY20 as price competition among local players is expected to weigh on margins exacerbated by increased transportation costs, FED and depressed macros.
- Finance cost is going to be a drag on earnings of our universe for 1QFY20 as increasing debt to finance capacity additions and working capital will take interest cover down to 1.3x for 1QFY20 vs. 2.9x/5.2x in 4QFY19/1QFY19.
- Leveraged players are worst placed in the current fickle environment with pricing pressure and are slated to post losses in 1QFY20 where MLCF will be affected the most as player offered high discounts in the market while PIOC’s working capital woes and loss on short term investments is expected to take a toll on profitability.
- LUCK and FCCL stand on the other hand of the spectrum with low leverage being the saving grace for both of the companies however margins are expected to take a beating (expected at 25/16% for 1QFY20 for LUCK/FCCL). We maintain an underweight stance on the sector with LUCK as our preferred play where our TP of PkR517/sh offers a return of 42%.
AKD Research
Lucky Cement is a cement manufacturing and distribution company which is based in Pakistan. Co. is engaged in the manufacture and sale of Ordinary Portland, Sulphate Resistant, and Slag Cement. Co.'s brand names included Lucky Cement, Lucky Star, Lucky Gold, Chairman, and Lucky Sulphate Resistant Cement. Co. maintains production facilities in Pezu (Production capacity: 13,000 tons per day) as well as in Karachi (Production capacity: 8,000 tons per day). In addition, Co. is engaged in developing export markets for bulk loose cement from Pakistan to the Gulf Countries, African Markets, and Far East Region including Nepal & Sri Lanka.
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.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.