Pakistan Cements: Update on ongoing expansionary cycle
Being the second of the ongoing pandemic expansion cycle (first in the south region), LUCK has successfully commissioned its brownfield expansion of 1.30mtpa at Karachi plant. This should be followed by a 1.2mtpa brownfield expansion of ACPL (expected COD: Dec'17) and 2.80mtpa Greenfield expansion of DGKC (expected COD: 1QFY19) at Hub, Baluchistan. Post completion of the first expansionary phase (5.30mtpa) in South, capacity utilization in the region/total industry is expected to drop at 57%/82% by 1QFY19 from 93%/86% in FY17, assuming demand growth of 8%. Consequently, this is likely to create significant supply side pressures, therefore, exerting pricing pressure over the short term, where the prices have so far remained stable (contrary to North region where cement prices declined by 6.5% since Jun'17). On the other hand, out of the ten announced expansions in North (totaling 19.6mtpa), only 5 have been able to achieve financial close so far (totaling 9.30mtpa). Accordingly, we see the pace of expansion to be gradual in North with additions coming online in a phased manner - the first expansion is expected to achieve its COD in 4QFY19. This should allow prices in the North region to stabilize at current levels as capacity utilization is anticipated to hover around 90% in the next 4yrs. In the context of the ongoing expansionary cycle, we prefer cement players with exposure in the Northern region including LUCK, MLCF, PIOC and CHCC.
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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