Pakistan Cement_Right place at the right time, (AKD Daily, Dec 31, 2020)
- A confluence of catalysts, some inherent (strong pricing power, successive capacity expansions), some external (construction package, drastic easing) have powered the strongest outperformance for AKD Cement Universe in the last eight years (63 ppts), delivering robust returns during an otherwise turbulent period
- On operational metrics, local cement demand posted slightly muted growth of 4.1%YoY for 11MCY20 majorly due to the lockdown period (Mar’20-Apr’20: local cement demand decreased by 24.1%YoY) being a drag.
- As for pricing, after conclusion of capacity expansion cycle in 1HCY20 where 8.1mn tons of capacity came online in last phase, pricing finally normalized and increased by PkR64/bag from a low of PkR496/bag to PkR560/bag in North, exhibiting relative pricing discipline as new capacity reduced barriers to do so.
- Moving forward, even though risks in the shape of increase in electricity/gas tariffs and interest rates coupled with snags from any CCP inquiry remain on the horizon, improving demand and price outlook will continue to drive the sector where we continue to like MLCF (TP: PkR57.4/sh, 32% upside) and LUCK (TP: PkR868.5/sh, 26% upside).
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.
Maple Leaf Cement Factory is engaged in the production and sale of white cement, grey cement and clinker. Co. is a subsidiary of Kohinoor Textile Mills Limited.
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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