Pakistan Cement_Seasonality weighs heavily on local demand, (AKD Daily, Dec 07, 2020)
AKD Daily
Pakistan Cement: Seasonality weighs heavily on local demand
- Local cement dispatches continue to increase with a 6%YoY growth in Nov’20 where South continues to lead (up 15%YoY for Nov’20) amidst a multitude of factors are at play including increasing demand in urban centers on the back of resumption in housing projects and North-based players decreasing their supply to the region.
- However, significant sequential decline was witnessed in dispatches of both the regions (South/North down by 12/25%MoM) as commencement of winter leads to a slowdown in construction activities.
- Winter season has arrived with a number of cost pressures for local cement manufacturers as coal prices have increased by 42% since Oct’20 while LNG prices are also increasing. Recent increase in cement prices of PkR20-25/bag can offset some part of the impact but sustenance of margins remains in question.
- We continue to like MLCF (TP: PkR47.4/sh) and LUCK (TP: PkR761.3/sh) from the AKD cement universe with the former being one of the lowest cost producers implying lower sensitivity to retail price variations, while latter’s cost efficiencies coupled with diversified investments make it a safe play.
AKD Research
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