AKD Securities Limited Equity Research – Daily Report (05-10-2019)

Karachi, November 05, 2019 (PPI-OT): Pakistan OMCs: Battle for market share heats up

Oct’19 increased by 7%YoY where both regions witnessed contrasting trends as north increased by 17%YoY while South posted a decline of 29%. For 4MFY20, total dispatches increased by 5%YoY where major growth was witnessed in exports of 17%YoY followed by 3%YoY growth in local dispatches.

The surprise rebound can be attributed mainly to the demand from private sector where housing schemes resuming/starting production played a part. We expect the demand from private sector to remain strong while a small part can be played by potential stocking up before CNIC conditions are re-imposed in Jan’20.

After the recent increase in North, prices have sustained their ground where weakness has only been in some parts of the region. However, relaxation of axle load can provide some buffer for the players to reduce prices in the wake of upcoming capacity additions.

After a disappointing 1QFY20, resurgence in dispatches is a ray of hope for the sector which can support prices thus rescuing the sector from posting heavy losses in 2QFY20 – potentially triggering buying activity in the sector in short term. However, we maintain our underweight stance on the sector with upcoming capacity expansions and seasonality expected to put pressure on prices.

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