AKD Securities Limited Equity Research – Daily Report

Karachi, April 17, 2019 (PPI-OT): Pakistan Cement: Downtrend to persist in 3QFY19

AKD Cement universe is expected to post a 34%YoY decline in profitability for 3QFY19 as higher energy/fuel cost weigh on margins despite 15%YoY higher retail cement prices. On QoQ basis, profitability is expected to decrease by 30% on the back of lower margins and dispatches.

For 9MFY19, 29%YoY decline in earnings is expected with finance cost being a drag as increasing debt to finance capacity additions and working capital needs will take the interest cover down to 5.7x vs. 22.6x in 9MFY18.

After commissioning of line-II, CHCC is going to witness significant burden of increased finance cost and depreciation resulting in company witnessing a 78/71% QoQ/YoY decline in profitability. However, we highlight a possibility of negative effective tax rate for 3QFY19 as company is liable for tax credit under section 65B.

FCCL is expected to outperform peers on YoY basis for 9MFY19 (up 19%YoY), courtesy a low base in 9MFY18 due to company’s line-II not being operational.

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