AKD Securities Limited Equity Research – Daily Report

Karachi, January 07, 2019 (PPI-OT): Pakistan Cement: North continues to be a drag

Local sales for Dec’18 decreased by 1.4%YoY with North, witnessing a decline of 7.7%YoY in local sales, becoming a drag due to slow disbursement of PSDP and political headwinds taking a toll while South, on the other hand, has posted an increase of 15.2%YoY on the back of strong private sector demand.

Exports have saved the day for South with an increase of 242.8%YoY for 1HFY18 as clinker demand from Bangladesh and Sri Lanka helped stack up the numbers though at the cost of lower margins. North lagged here as well with a decline of 17.9%YoY for 1HFY19. Overall, total cement sales for 1HFY19 are up by 3.9%YoY.

Moving forward, North based players are going to face a tough year as 9.4mn tons of capacity is expected to come online in CY19 while demand slowdown is going to aggravate the situations. On the other hand, exports are expected to keep things calm in south. We have an underweight stance on the sector with FCCL (Dec’18TP: 19.7/sh) as top sell.