Analyst:

Muhammad Sarfraz Abbasi

Sarfraz.abbasi@atlascapital.com.pk

Summit Capital Update Pulse March 16, 2011

(+92-21)-111-226-100 Ext 404

(Formerly Atlas Capital Markets (Pvt.) Limited)

BUY
Cement Sector: All eyes on 8MFY11 performance overview… Market Snapshot
During the 8MFY11, total local dispatches witnessed a Index Chg %
2HFY11… decline of 8% to 13.79m tons against 15.07m tons in KSE 30 11477.61 -292.01 -2.48
8MFY10. However, local dispatches in Feb ‘11 remained KSE 100 11829.24 -216.14 -1.79
Synopsis… flat as against Feb ‘10 mainly because of slow down in KSE ALL 8220.38 -141.00 -1.69

Total dispatches dropped by 11% YoY to 14.74m tons
Pakistan Research

construction activities across the country. On the export

in 1HFY11 in contrast of 16.59m tons last year. front, in 8MFY11, cumulative dispatches were recorded Key Data

Local and export dispatches stood 10.11m and 4.63m 15% YoY lower, whereas export dispatches recorded
tons respectively. an improvement of 6% YoY and 25% MoM in Feb’ 11 12M Avg. Volume (m) LUCK 1.39

Monetary sales posted a growth of 8% YoY to due to demand upsurge in Afghanistan and India. 12M Avg. Volume (m) DGKC 3.60
PKR39.82bn. 12M Avg. Volume (m) ACPL 0.07

PBT of the sector declined by 63% YoY to PKR298.51m Cement performs well in second half...
in 1HFY11. Historically, cement sector has been performing much

We recommend a BUY stance for the LUCK, DGKC better in last second half (Jan – June) in comparison of 12M relative performance vs KSE
and ACPL with a Fair value of PKR85, PKR39 and first half (July – Dec). In past five years (2006-2010), local 150%
LUCK KSE-100
PKR69 respectively. dispatches showed an average growth of 12% in 125%
DGKC ACPL

second half over the frist half of the year.

Total turnover surged by 8% YoY in 1HFY11…. 100%
Local dispatches
Total sales of the sector (sample of 16 companies 75%

excluding MLCF & AACIL) posted a growth of 8% YoY to FY06 FY07 FY08 FY09 FY10 50%

Apr-10

Aug-10

Oct-10

Feb-11
2.50

Mar-10

May-10

Jun-10

Sep-10

Nov-10

Dec-10

Jan-11

Mar-11
Jul-10
PKR39.82bn against PKR36.44bn in 1HFY10 due to 22%
YoY higher retention prices. Cement price was hovering 2.20

M Tons
around PKR335 in 1HFY11 against PKR275 in 1HFY10. 1.90
Conversely, cement dispatches witnessed a sharp drop 1.60 2 Years coal prices Trend
of 11% Y-o-Y to 14.74m tons as against 16.59m tons in 150
1.30

Per ton price (US$)

1HFY10 due to 1) seasonal impact, 2) devastating floods 120

and 3) delayed public sector construction activities. 1.00 90

July Aug Sept Oct Nov Dec Jan Feb Mar Apr May June
Sector feels the heat of rising input costs…
60
Source: Global Cement, Summit Capital Research
30
Cost of sales of the sector grew by 11% YoY to
Thus, we believe that an upsurge in industry dispatches 0
PKR39.82bn in contrast of PKR36.74bn in 1HFY10 due to

Mar-09

May-09

Sep-09

Nov-09

Jan-10

Mar-10

May-10

Sep-10

Nov-10

Jan-11

Mar-11
Jul-09

Jul-10
could be seen in remaining months of FY11. Construction
increased input costs. Energy cost plays a pivotal role in
activities for flood affected people are inevitable as well Source: Global Cement, Summit Capital Research
driving sector’s earnings as key input costs contribute
as normal construction activity may also increase due to
about 65-70% in total cost of sales. Coal is a basic input
suitability factor as construction activities can be
cost of cement sector and its prices were hovering
performed comfortably. Summit Capital (Pvt.) Ltd
around US$123/ton in Dec’10 as against US$95/ton in B-209, Park Towers, Clifton, Karachi
Dec’ 09. Soaring input costs, excess supply and We recommend a BUY stance for the LUCK (Fair value Equity Research: Equity Sales:
depressed demand hit hard to profitability of the sector. of PKR85, upside potential 27%), DGKC (Fair value of Tel: 92 (21) 5376125 Tel: 92 (21) 5368261-8
Consequently, PBT declined by 63% YoY to PKR298.51m PKR39, upside potential 61%) and ACPL (Fair value of Fax: 92 (21) 5376126 Fax: 92 (21) 5376122
as against PKR800.08m in 1HFY11. PKR69, upside potential 39%) Money Market: Corporate Finance:
Tel: 92 (21) 5376128 Tel: 92 (21) 5824991
Fax: 92 (21) 5376129 Fax: 92 (21) 5376122
Disclaimer: All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time
Financial Products Distribution:
of publishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, Summit Capital (Pvt.) Limited
Tel: 92 (21) 5376125
accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the publication. All information is
Fax: 92 (21) 5376126
provided without warranty and Summit Capital (Pvt.) Limited makes no representation of warranty of any kind as to the accuracy or completeness of any
information hereto contained.