Pakistan Cement: Sector getting red carded
- Local cement demand is set to continue facing the music due to overall fiscal consolidation where ongoing regulatory tightening is expected to make things worse. We forecast a grim outlook for North particularly with demand expected to decline by 2%.
- We also incorporate into our estimates the new reality post-IMF where we expect electricity/gas tariffs to increase by 10/15% for FY20 and FY21 while we have also revised our interest and exchange rate forecast to 14.2/12.3% and PkR164/176/USD for FY20/21 on the back of economic adjustments taking place.
- Local cement prices, particularly in the North, are expected to be under pressure as 7.3mn tons of capacity is expected to come online in the region during FY20, consequently we have assumed an average price of PkR550/bag for FY20 .
- Though sector currently trades at an attractive EV/EBITDA of 5.6x, -12% 3yr CAGR for EBITDA/ton paints a dismal picture hence we maintain our Underweight stance on the sector with PIOC as our top sell as stock trades at EV/ton of USD40/ton vs our sector’s EV/ton of USD36.
AKD Research
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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