Pakistan Cement_FY18 Dispatches Review
Reaching new milestones, total cement dispatches posted a robust growth of 13.8%YoY to reach 45.89mn tons during FY18, significantly higher than the 3.7%YoY growth witnessed in FY17. This was predominantly led by strong local uptick in dispatches of 15.4%YoY (record high absolute growth in a fiscal year - 5.49mn tons) on account of high paced infrastructure spending during the election year (PSDP spending: +7%YoY growth to reach PkR796bn in FY18). Faltering exports on the other hand also posted a decent recovery during the latter part of year to close at 4.78mn tons (up 1.78%YoY) in FY18. In Jun’18 alone, total dispatches increased by 9.2%YoY to 2.98mn tons, primarily led by 8.4%YoY growth in domestic dispatches to 2.58mn tons. Also, exports recovered in Jun’18 as well, going up 15.3%YoY to 0.398mn tons. Going forward, we anticipate this double digit demand growth to slow down in the upcoming months on moderate construction activity owing to: 1) forthcoming monsoon rains and 2) lower PSDP spending till the formation of new government after elections. The cement sector has corrected 17% since May'17 on the risk of pricing indiscipline and higher coal prices. We believe this underperformance and price recovery (+PkR65/bag in North since Feb'18) has opened up valuations with AKD Cement Universe now trading at a P/E of 8.0x vs. 13.5x in May'17. While maintaining our Marketweight stance for the sector, our top picks include well diversified, energy efficient companies like LUCK (TP: PkR790/sh), DGKC (TP: PkR158/sh), MLCF (TP: PkR89/sh) and PIOC (TP: PkR91/sh).
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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