Analyst:

Muhammad Sarfraz Abbasi

sarfraz.abbasi@atlascapital.com.pk
(+92-21)-111-226-100 (Ext.404)
Morning Pulse Dec 8, 2010

Cement Sector: Diminishing exports recorded decline of 8.80% to 8.33m against 9.13m tons BUY
during the same period of last year. This decline in local Market Snapshot
amid shrinking demand… dispatches was attributed to the slow down in Index Chg %
construction activities across the country as post floods KSE 30 11056 -5.17 -.05
Synopsis… normal construction activities could not be KSE 100 11431.01 -9.06 -0.08
KSE ALL 7947.34 -8.32 -0.10
materialized. On export front, industry is faced with
As per the numbers released by All Pakistan Cement
immense challenges as in 5M/FY11 total export
Pakistan Research

Manufacturers Association (APCMA) cement industry Key Data (DGKC)

dispatches were down by 18.07% Y-o-Y basis. In Market Cap(PRs bn) 11.34
dispatches fell by 11.99% Y-o-Y basis to 12.25m tons as
comparison of 5M/FY10, export through sea fell by Shares Outstanding (m) 365.10
against 13.92m tons during the corresponding period of
34.01% while export to India also witnessed a sharp drop Bloomberg DGKC PA
last year. On M-o-M basis cement dispatches during the
of 33.97%. Nevertheless, export to Afghanistan still 12M Avg. Volume (m) 3.62
month of November’10 witnessed sharp decline of
managed to show reasonable growth of 18.35%.
17.25% to 2.42m tons over 2.92m tons during the month
Dwindle in export demand was mainly because of slow Key Data (LUCK)
of October’10. In our today’s report we discuss cement Market Cap(PRs bn) 24.67
down in construction activities and prevailing over
sector performance and future outlook. Shares Outstanding (m) 323.38
supply situation at GCC and other markets.
Bloomberg LUCK PA
Total dispatches in FY11 12M Avg. Volume (m) 1.65
Future Outlook and recommendation…
Tons 5M/FY10 5M/FY11 Y-o-Y
We expect revival in demand during the 2H/FY11. Our
12M LUCK & DGKC relative performance vs KSE
Local 9,126,395 8,323,259 -9% anticipation is backed by the factors 1) reconstruction
138%
Exports 4,785,388 3,920,700 -18% activities for flood infected people 2) normal
constructions activities in country 3) infrastructure 116%
Total 13,911,783 12,243,959 -12% rebuilding post floods 4) improvement in exports. Our 94%
top picks from the sector are LUCK and DGKC. We
Tons Oct/FY11 Nov/FY11 M-o-M recommend by stance for the LUCK (Fair value PRs90 72% LUCK DGKC
KSE
Local 1,974,387 1,731,255 -12% upside potential 17.91%) and DGKC (Fair value PRS39 50%
upside potential 25.60%).

Apr-10

Aug-10
Feb-10

Oct-10
Dec-09

Jan-10

Jun-10

Sep-10

Nov-10

Dec-10
Mar-10

May-10

Jul-10
Exports 945,163 684,648 -28%
Total 2,919,550 2,415,903 -17%
Source: APCMA, Atlas Research

Demand remains key culprit behind slow down…

During the month of November’10 local dispatches
witnessed decline of 12.31% to of 17.25% to 2.42m tons Atlas Capital Markets (Pvt.) Ltd
over 2.92m tons in the month of October last year. This B-209, Park Towers, Clifton, Karachi
decline in dispatches was witnessed both in local and Equity Research: Equity Sales:
export dispatches. Export dispatches also experienced Tel: 92 (21) 5376125 Tel: 92 (21) 5368261-8
a sharp drop of 27.56% to 0.68m tons against 0.95m tons Fax: 92 (21) 5376126 Fax: 92 (21) 5376122
during the month of October’10. However, when Money Market: Corporate Finance:
compared on Y-o-Y basis, 5M/FY11 local dispatches Tel: 92 (21) 5376128 Tel: 92 (21) 5824991
Fax: 92 (21) 5376129 Fax: 92 (21) 5376122

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Limited accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the publication. All Fax: 92 (21) 5376126
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