• Pakistan Cements: Our channel checks suggest close to record local sales in the month of April 2015 of ~2.6mn tons (up 2% MoM, 3% YoY). Total cement sales including exports will reach ~3.2mn tons (up 8% MoM, 1% YoY).
  • In 10MFY15, local sales will reach 23mn tons (up 8% YoY) and exports 6mn tons (down 9%), resulting in total sales of 29mn tons (up 4% YoY).
  • Another positive development for Pakistan cement sector was better than expected 3QFY15 results. Cement companies posted impressive Mar 2015 quarter results with profits rising 14% YoY (5% QoQ). These results were better than our expectation of 11% YoY (2% QoQ).
  • Margins jumped by 120bps to 36% YoY in 3QFY15 on the back of lower international coal and oil prices, down 14% YoY and 53% YoY respectively.
  • We believe best of FY15 quarter is yet to come as companies are likely to register higher earnings in 4QFY15 on the back of full realization of decline in input costs and better local cement sales due to higher development activities.
  • We expect earnings of Topline Cements Universe to grow at 3-year (FY15-17) CAGR of 18% due to 1) higher local cement demand, 2) margins accretion due to lower coal prices & declining power charges, and 3) deleveraging.
  • Pakistan cement sector trades at FY15/16 PE of 9.7x/8.2x with EV/ton of US$135 including investments and US$106 excluding investments.
  • We remain overweight on Pakistan cements sectors with Lucky Cement (LUCK) and DG Khan Cement (DGKC) as our preferred stocks.
  • Investors should also focus on Kohat Cement (KOHC) with FY15E/FY16F PE of 9.2x/7.6x and Maple Leaf Cement (MLCF) with FY15E/FY16F PE of 9.6x/8.4x in case of any correction.
  • Our channel checks suggest close to record local sales in the month of April 2015 of ~2.6mn tons (up 2% MoM, 3% YoY). Total cement sales including exports will reach ~3.2mn tons (up 8% MoM, 1% YoY).
  • In 10MFY15, local sales will reach 23mn tons (up 8% YoY) and exports 6mn tons (down 9%), resulting in total sales of 29mn tons (up 4% YoY).
  • Another positive development for Pakistan cement sector was better than expected 3QFY15 results. Cement companies posted impressive Mar 2015 quarter results with profits rising 14% YoY (5% QoQ). These results were better than our expectation of 11% YoY (2% QoQ).
  • Margins jumped by 120bps to 36% YoY in 3QFY15 on the back of lower international coal and oil prices, down 14% YoY and 53% YoY respectively.
  • We believe best of FY15 quarter is yet to come as companies are likely to register higher earnings in 4QFY15 on the back of full realization of decline in input costs and better local cement sales due to higher development activities.
  • We expect earnings of Topline Cements Universe to grow at 3-year (FY15-17) CAGR of 18% due to 1) higher local cement demand, 2) margins accretion due to lower coal prices & declining power charges, and 3) deleveraging.
  • Pakistan cement sector trades at FY15/16 PE of 9.7x/8.2x with EV/ton of US$135 including investments and US$106 excluding investments.
  • We remain overweight on Pakistan cements sectors with Lucky Cement (LUCK) and DG Khan Cement (DGKC) as our preferred stocks.
  • Investors should also focus on Kohat Cement (KOHC) with FY15E/FY16F PE of 9.2x/7.6x and Maple Leaf Cement (MLCF) with FY15E/FY16F PE of 9.6x/8.4x in case of any correction.
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