Pakistan Cements: Exports support utilization amid sluggish domestic demand
Provisional cement sales data for Sep’18 provides some interesting insights in terms of sales mix and divergent regional dynamics.
During Sep’18, industry exports hit a 47-mths high posting 75% YoY growth, mainly supported by clinker sales. Sales in the local market remained not-so-exciting with 4% YoY growth, partly because of religious holidays.
Although low margin, exports are expected to play a key role in reducing the possibility of supply glut in local market during ongoing expansion cycle. The regional utilization level for 1QFY19 supports our view, where despite 60% capacity addition, utilization in South region stood at 81%.
While we affirm the recent newsflow on PKR20-25/bag increase in North region cement MRP, we highlight that the ex-factory prices have not changed and increase is reflected in dealers’ margin. Prices in South region have remained stable.
Overall sales in 1QFY19 grew by 3% YoY to 10.6mn tons, which is 21.5% of our full year expectation of 49.5mn tons. Our top picks are DGKC (TP: PKR160), LUCK (TP: PKR710), and MLCF (TP: PKR75).
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