AKD Securities Limited – AKD Daily (January 06, 2023)

Karachi, January 06, 2023 (PPI-OT): Pakistan Cement: Dispatches remain dampen in Dec’22, down 9.4%YoY

Local cement dispatches for Dec’22 clocked in at 3.68mn tons, down by 4.8%/9.4% MoM/YoY. Region-wise, North witnessed a steep drop of 12.5%YoY to 2.96mn tons.

Richards Bay coal prices have continued to decline amidst lower than anticipated heating demand due to milder winters in Europe, currently hovering at US$180/ton compared to Dec’22/2QFY23 avg. of US$231/239/ton.

With an overall shift in macro-policy focus from growth in previous years to consolidation, we expect sector volumes to decline by 16-17% for FY23.

With further hikes in policy rate expected by the SBP (as much as 200bps), this may prove to be further detrimental to the players in our universe (AKD universe D/E: 0.66 ex-LUCK).

Overall, companies with timely expansions may remain better off in the near term, for this reason we continue to advocate LUCK/MLCF (Dec’23 TP: 737/34 per sh) on the back of low leverage and better production efficiencies contributing to their margins going forward.