Karachi, April 25, 2022 (PPI-OT): Pakistan Cement: Profitability to decline 53-14%YoY-QoQ for 3QFY22

AKD Cement Universe is expected to post PAT of PkR7.6bn for 3QFY22 against PAT of PkR8.9/16.4bn for 3QFY21/2QFY22. On YoY basis, profitability is expected to decline majorly due to high base as MLCF, DGKC and LUCK recorded high other income during 3QFY21 while on QoQ basis, the PAT is expected to decline on the back of increasing power and fuel costs.

Trend of gross margins for 3QFY22 will vary for every players in our universe where players with high inventory of coal from 2QFY22 are going to outshine while additional comfort will be provided be increased use of Afghan coal.

We expect DGKC to witness highest pressure on margins with the company having low inventory of coal while in South, it couldn’t utilize Afghan coal either due to high freight cost. LUCK is expected to be the only player to post a QoQ increase courtesy higher other income from ICI.

The continued volatility in coal prices can provide good opportunity to accumulate where we maintain our overweight stance on the sector for CY22. In this backdrop, we highlight LUCK, MLCF and FCCL as our top picks from sector.