AKD Securities Limited Equity Research – Daily Report

Karachi,
February 08, 2019 (PPI-OT): Pakistan Cement: Jan’19_Cement dispatches decline
by 11%YoY

Local
dispatches for Jan’19 clocked in at 3.1mn tons, down 18.0%YoY, as economic
slowdown looms large over the sector while seasonality took a toll as well,
dragging down the local dispatches by 6.4%MoM.

Exports
have turned out to be the shining star of FY19 so far, averting the risk of
price war for the Southern region while also taking the capacity utilization
for South to a phenomenal 92%.

The
dismal run of local demand is expected to continue in the medium term (down
4%YoY in 7MFY19) as the slowdown intensifies, while sustained clinker demand in
Sri Lanka and Bangladesh will keep the exports uplifted. (up 50.4%YoY in
7MFY19)

We
maintain our Underweight stance on the sector, trading at EV/EBITDA of 7.3x, as
pressure on prices builds up in the backdrop of weak demand and rate FCCL (TP:
19.7, 11% downside) as our top sell.

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