JS Securities Limited – Morning Briefing

Karachi, March 07, 2019 (PPI-OT): Feb-2019 dispatches could fall 12% YoY, southern players to dominate

We expect cement dispatches to decline by a hefty 12% YoY during Feb-2019 to 3.32mn tons from 3.78mn tons in Feb-2018.

While North’s dispatches are expected to decline sharply (-24% YoY), southern players could show robust growth (+39% YoY) in the month.

Local dispatches, could decline by 19%, whereas exports are likely to increase massively by 69% YoY.

We reiterate that companies with recent plant additions in the south namely LUCK, DGKC and ACPL are expected to dominate in terms of sales’ performance during the month.

Dispatches to dip 12% YoY in Feb-19; exports likely saviour

Cement dispatches for the month of Feb-19 are expected to decrease by 12% YoY to 3.32mn tons from 3.78mn tons in the same month last year. While the drop is partly due to heavy rain in northern areas of the country, a slowdown in demand in the Northern region also explains the muted trend during the month. North-based dispatches could record a heavy 24% YoY drop in Feb-19, where local and export sales are expected to decrease by 25% YoY and 9% YoY respectively.

In contrast, South-based players are expected to continue to post robust numbers where we are envisaging a 39% YoY growth in dispatches. This would be particularly on the back of a strong increase in exports (~186% YoY), along with an anticipated double-digit growth (10% YoY) in local dispatches. For 8MFY19, total dispatches are expected to decline by 5% YoY, mainly on the back of 11% YoY decline in North-based dispatches (southern dispatches grew 14% YoY).

Southern players continue to dominate

Analyzing forecasted dispatches by company, we anticipate Attock Cement (ACPL) could potentially outshine owing to stellar growth in exports. We are expecting the company’s total dispatches to increase by 40% YoY with ~237% YoY growth in exports during Feb’19. D.G Khan Cement (DGKC) is expected to follow with total dispatches growth of 31% YoY. Again, exports are anticipated to play a pivotal role, likely to rise 176% YoY. Both ACPL and DGKC have recently added new plants in the south, helping these companies in boosting their export sales.

Note that total exports in the southern region are likely to record a 186% YoY growth as compared to 10% YoY increase in local. Tapping new markets, especially Bangladesh, partially explains the rise in exports for these companies. We reiterate that recent capacity expansion by these players, in relatively ideal proximity for seaborne trade, is providing them with the required apparatus to boost exports. However, the same is taking a toll on export market shares of north based players.

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