Pakistan Cements_Upbeat demand ratchets up earnings outlook, (AKD Daily, Aug 06, 2020)
AKD Daily
Pakistan Cements: Upbeat demand ratchets up earnings outlook
- We raise our cement universe estimates by 11.9/9.4% for FY21/22 where progress on materialization of various infrastructure/housing projects have increased our optimism on local cement demand accompanied by relatively resilient offtake; we now expect local cement demand to grow at 11% for FY21 against 6% previously.
- AKD Cement universe has returned 100.7% since 25th Mar’20 (when KSE-100 made its 1yr low of 27,228pts) against 47.4% of KSE-100 as a plethora of factors contributed to the cause including implementation of construction package incentives, Naya Pakistan Housing scheme and initiation of Dam construction.
- Despite significant outperformance, we still maintain LUCK as our preferred play amongst conglomerates and MLCF from pure-play cements, with both companies trading at a discount to EV/EBITDA of their respective groups, indicating further room for upsides.
- Contrary to recent market rumors regarding ongoing case against Competition Commission of Pakistan (CCP), our correspondence suggests there isn’t an exact timeframe for announcement of decision and local players have an option of going to the tribunal or appeal in case of an unfavorable decision.
- Re-iterating LUCK (TP: PkR693.5/sh, 15.6% upside) and MLCF (TP: PkR41.9/sh, 19.6% upside) as our top picks, we maintain a favorable outlook on the sector on the back of encouraging demand numbers which opens up room for local players to increase prices in the medium term.
AKD Research
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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