Pakistan Cements : Demand growth continued; recovery in cement prices likely
- As per our channel checks, cement prices in North region are likely to see a near-term relief with PKR10/bag increase (effective today). Possibility of further price recovery in the North region, which has been plagued by a price-war like situation for the past few months, is likely.
- We expect the recent development to drive positive market reaction in near-term given concerns on cement companies’ margin in 3Q in the wake of increasing coal prices, jump in cement price discount during Jan-Feb’18 and devaluation.
- However, the sustainability of incremental pricing continue to remain a concern in the backdrop of upcoming capacities of Bestway Cement (BWCL) and Cherat Cement (CHCC) ahead of schedule.
- We expect cement sales for Feb’18 to jump by 8% YoY to 3.72mn tons driven by better local (+7% YoY) and exports sales (+22% YoY). Demand is up 14% YoY in 8MFY18, posing upside risk to our estimates (+6%); however a slowdown can be witnessed from May onwards owing to Ramazan and Eid factor along with transition in government.
- Given their better ability to bear pricing pressures, effective cost management, strong brand recognition and business diversification, LUCK, DGKC and MLCF are well-placed to weather the pressure from price discounts. Reiterate Buy!
Co. is engaged in the production and sale of Ordinary Portland and Sulphate Resistant Cements.
Lucky Cement is a cement manufacturing and distribution company which is based in Pakistan. Co. is engaged in the manufacture and sale of Ordinary Portland, Sulphate Resistant, and Slag Cement. Co.'s brand names included Lucky Cement, Lucky Star, Lucky Gold, Chairman, and Lucky Sulphate Resistant Cement. Co. maintains production facilities in Pezu (Production capacity: 13,000 tons per day) as well as in Karachi (Production capacity: 8,000 tons per day). In addition, Co. is engaged in developing export markets for bulk loose cement from Pakistan to the Gulf Countries, African Markets, and Far East Region including Nepal & Sri Lanka.
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.
BMA is amongst the leading financial groups in Pakistan. BMA Capital’s core areas of business include Capital Markets, Corporate Finance & Advisory, Asset Management, and Financial Products Distribution. BMA Capital is the leader in privatisation advisory in Pakistan, having successfully advised on over 50% of all privatisations in Pakistan, by value, in transactions valued in excess of US$4 billion. Recent transactions include joint lead managing the $813 million GDR Offering of 10% of OGDCL on the London Stock Exchange in 2006-07, and advising Etisalat on their successful acquisition of a 26% strategic stake in Pakistan Telecommunications Company Limited (PTCL) for US$2.6 billion, the largest M&A transaction and foreign direct investment in Pakistan’s history. The firm is among the top brokers in the Pakistan equity and treasury markets, and is among a handful of firms that comprehensively cover all segments of the capital markets. This is supported by a very strong and independent research capability, which is quoted regularly in both local and international media. BMA Capital’s retail brokerage brand, BMA Trade, has launched a nationwide network of branches as well as a comprehensive online trading platform, enabling investors across Pakistan to take part in the capital markets.
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