AKD Quotidian about — Cements: Local Jan’13 sales higher than 2QFY13 monthly runrate

Karachi, February 06, 2013 (PPI-OT): Local cement offtake for Jan13 has registered at 2.135mn tons, up 10%YoY/down 5%MoM but higher than the 20FY13 monthly average local offtake of 200Gmn tons- At the same time, cement exports for Jan13 have clocked in at O.52mn tons, down by 12%YoY and 10%MoM.

According to AKD Securities, as a result, local dispatches have registered at 13.8Gmn tons in 7MFY13, up 8%VoY while 7MFY13 exports at4.75mn tons are down 6%YoY. This translates into total 7MFY13 dispatches of 18.Glmn tons, up 4%YoV. Solar, 4 cement companies (ACPL, KOHC. LUCK, MLCF) have announced their 1HFY13 results where combined profits of PkR78bn are up an impressive 102%YoY.

Considering that Jan13 local cement offtake is higher than the 20FY13 average monthly run rats and that local dispatches are expected to pickup momentum in the run-up to general elections, the cement sector looks well set to deliver a stellar 2HFY13. As such, despite recent outperformance, AKD Securities Limiteds believe the Cement sector still retains potential where AKD Securities Limited’s preferred plays are LUCK and DGKC. Within non coverage scrips. FECTC and PIOC appear relatively attractive.

7MFY13 Cement offtake: Local cement offtake for Jan13 has registered at 2.135mn tons, up 10%YoY/down 5%MoM but higher than the 2QFY13 monthly average local offtake of 2.096mn tons. At the same time, cement exports for Jan’13 have clocked in at 052mn tons, down by 12%YoY and 10%MoM. In this regard, while exports from the South rose by an impressive 32%MoM, exports from the North slipped by 24%MoM. As a result, local dispatches have registered at 13.86mn tons in 7MFY13, up 8%YoY while 7MFY13 exports at 4.75mn tons are down 6%YoY. This translates into total 7MFY13 dispatches of 18.61mn tons, up 4%YoY.

Cement results so far: Four cement companies (ACPL, KOHC, LUCK, MLCF) have announced their 1HFY13 results to date where combined profits of PkR7.8bn are up an impressive 102%YoY (ex-MLCF which rebounded from a loss last year, combined profits are up 58%YoY). In this regard, aggregate 2QFY13 earnings have jumped by a strong 43%YoY on the back of higher local dispatches an amdist sustained margins. Considering that Jan’13 local cement offtake is higher than the 20FY13 average monthly runrate and that local dispatches are expected to pickup momentum in the run-up to general elections, the cement sector looks well set to deliver a stellar 2HFY13.

Investment Perspective: The listed cement sector has gained 106% over the last year, outperforming the KSE-100 Index by 62% in the process as the confluence of several positives led to a swift reversal in sector fortunes. Although risks remain (e.g. energy deficit and lower exports), FY13F is shaping up to be an exceptionally strong year for Cements. Despite recent outperformance, AKD Securities Limited believes the Cement sector still retains potential where preferred plays are LUCK and DGKC. Within non coverage scrips, FECTC and PIOC appear relatively attractive.

Leave a Reply