Morning Briefing for April 08, 2014 – Standard Capital

Karachi, April 08, 2014 (PPI-OT): Cement dispatches to get boost from PSDP disbursements | regional elections

Out of the targeted budget amount of Rs415bn – GoP has released Rs248.8bn under the head of Public Sector Development Program (PSDP) which indeed is a good omen for project development in the country.

According to Standard Capital, this is the reason why Standard Capital saw slight 2% increase in overall local cement dispatches in the 9MFY14. At present till-date the cement dispatches throughout the country reached 18.74mn tons as against some 18.4mn tons reported in preceding fiscal.

Economy to portray better picture
It seems that now the fiscal space of the GoP has increased with the gift from Middle Eastern friendly state where GoP is now identifying new projects for immediate disbursements. This is indeed is a good aspect with respect to long term goals. Some of the disbursement flows went to energy related projects, National Highway and Water and power division etc. This would indeed build help in overall capacity building in the economy.

Firmed up cement rates – bullish sentiments to prevail in cements
given heightened demand
Despite rumours of breaking cartel because DGKC building plant in the Southern zone – Standard Capital does not see any decrease in either local dispatches or any erosion in cement bag prices given demand pressures emanating from local economy. Moreover, Standard Capital sees cement demand increasing from across the border once there would be thaw in relations with India in their post election period. The likely victory of BJP led candidate means that there may be businessman like approach followed by the leaders from Indian side of the border – Standard Capital takes this as good news for cement manufacturers.

Symbol P/E Exp.P/E PBV ROE ROA
PIOC 6.79 4.21 0.83 12.23 5.95
FECTC 4.85 4.46 1.37 25.2 10.59
CHCC 6.2 5.34 1.77 15.9 9.27
KOHC 6.96 6.21 2.74 44.2 18.02
DGKC 7.32 7.54 0.74 12.48 8.11
DCL 8.69 8.78 0.4 4.87 1.82
FCCL 12.08 9.13 1.47 2.71 1.23
ACPL 7.7 9.43 2.13 21.67 16.14
LUCK 11.28 10.62 2.51 20.39 16.69
LPCL 9.95 12.22 1.38 9.38 6.98
MLCF 4.82 5.24 1.17 27.28 9.96

Also elections in Afghanistan is good for regional stability wherein Standard Capital expects resumption of cement dispatches in that country with the opening of Torkham borders. Hence Standard Capital predicts overall dispatches may reach 35mn tons in FY14.

Recommendations – outperform ratings in FCCL

Standard Capital has outperform ratings in FCCL and DGKC (please see Standard Capital’s detailed reports). Standard Capital also likes CHCC given Standard Capital’s preceding coverage – given their efficient plant model. Please also see low PE bases of PIOC, MLCF etc.

As on April 7, 2014
Avg volume (52 weeks) (Mn) 0.74 5.25 14.23 8.92
52 weeks High (Rs) 367.00 97.20 18.60 31.77
52 weeks low (Rs) 169.90 67.20 8.14 26.35
Close (Rs) 352.00 91.88 17.54 29.09
Market Capitalization (bn) 114.13 40.25 23.35 15.35
Beta 0.99 1.26 1.36 1.08
Total No of shares (mn) 323.38 438.12 1,331.12 527.73
Free float shares (Mn) 129.35 200.80 381.31 184.14
Major cement players Statistics

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