MLCF: Near term pain before situation improves, (AKD Daily, Dec 27, 2019)
- We update our investment case for Maple Leaf Cement Ltd (MLCF) with our Dec’20 TP of PkR24.4/sh implying a Sell stance as near term weak sector dynamics are expected to weigh significantly on profitability.
- Though retail prices in North have considerably improved compared to 1QFY20, high discounting is expected to mitigate the impact — as evident by difference between PBS and MLCF’s realized prices standing at 16.9% in 1QFY20 against 6.2%/10.8 for FY18/19.
- Recent right issue of PkR6.1bn by MLCF is expected to decrease the debt burden significantly. However, commencement of debt repayment after start of production from new line and ongoing price competition is expected to keep D/A at 28/29% for FY20/21.
- MLCF has returned an astounding 58% in last two months as euphoria surrounding interest rate cut drove the stock prices. Moving forward, we expect prices to come under pressure in near term as reality of weak sector dynamics sets in. However in medium term, normalizing sector dynamics and further expectations of interest rate cut can induce a rally.
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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