Pakistan Cements: Dam’ned if you do, ‘dam’ned if you don’t
After running an initial feasibility study in CY00, construction of Mohamand Dam is expected to finally commence in 1HCY19. With a total PC-I cost of PKR307bn, Federal Govt. is expected to finance the reservoir cost of PKR144bn while WAPDA bridges the shortfall.
Dam construction is expected to take 5 years and 8 months and generate meagre annual demand of 0.3-0.4mn tons cement from CY20. However, a slow pace of construction can result in even lower demand being generated.
Players in the vicinity of the dam site are expected to be at an advantage to qualify for the supply contracts where, from our universe, CHCC and LUCK will see an increase of PKR0.39 and PKR0.19 in EPS for FY21 with an increase of 0.05mn tons of cement per annum.
We maintain our view of significant pressure on prices in North with 9.4mn tons of capacity additions expected in CY19 and term the incremental demand from the dam as a drop in the ocean. At current levels, we have an underweight stance on the sector.
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.
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