EUR 3.54 For Business Accounts Only

Pakistan Cements: 3Q profits declined, volumetric growth to sustain

• During 11MFY17, total dispatches clocked in at 37.6mn tons, up 6%YoY, led by 11%YoY growth in local dispatches with drag from 20%YoY decline in exports. Local dispatches grew 11%YoY in May’17, whereas exports dropped 45%YoY during the month.

• Despite volumetric growth of 4%YoY in 3QFY17, IMS Cement Universe posted profit decline of 7%YoY (+3%YoY ex-FCCL). This was largely contributed by steep rise in coal and FO prices. Moreover, decline in regional prices during the quarter also added to the strain along with some company specific factors.

• Going forward, Federal PSDP allocation of PkR1.001tn for FY18F and potential inclusion of Diamer Bhasha Dam under CPEC would be major impetus. However, local dispatches may observe a slow period during Ramadan and Monsoon season, but are likely to recover from Oct’17. We believe industry would be able to pass-on cost push of PkR15/bag on account of rise in FED for FY18F. We selectively prefer CHCC and MLCF.