AKD Quotidian about — Cements: Numbers rebound in Sep’12

Karachi, October 12, 2012 (PPI-OT): As per numbers quoted by the All Pakistan Cement Manufacturer’s Association (APCMA), domestic cement offtake in 1QFY13 increased by 5.3%YoY to stand at 5.4 million tons while offtake in Sep’12 alone increased by 19.8%YoY and 13.0%MoM to stand at 1.79 million tons.

According to AKD Securities, while 1QFY13 exports declined by 2.7%YoY to 2.27 million tons, Sep’12 exports rebounded to 818k tons, up 3.6%YoY and an encouraging 16.9%QoQ. As a result, cumulative cement volumes (local + exports) increased by 2.8%YoY in 1QFY13 to stand at 7.7 million tons. The uptick in volumes has come about due to increased construction activity within the country (both the Northern and southern regions) post the holiday season (Ramadan and Eid) as well as improved weather conditions following floods in May’12-Jul’12. Also encouraging is the improved situation within Northern exports whereby they registered an increase of 13.0%YoY and 23.8%QoQ in Sep’12 to stand at 633.9k tons. That said, Southern exports (sea route) declined by 19.5%YoY (-ve 2.1%MoM) in Sep’12 to stand at 184.1k tons for a cumulative 1QFY13 decline of 13.5%YoY.

Investment Perspective: Sharp improvement in local volumes in both the North and South zone buttress AKD Securities’ bullish outlook on Pakistan Cements where out top picks are LUCK (FY13F P/E: 5.3x; Tp: PKR 154.4/share) and DGKC (FY13F P/E: 5.8x; TP: PKR 56.6/share).

MCB: 9MCY12 Result Preview

MCB is scheduled to announce its 9MCY12 result on Oct 17’12. On a consolidated basis, AKD Securities expects MCB to post NPAT of PKR 16.84 billion (EPS: PKR 18.30) in 9MCY12 vs. NPAT of PKR 15.52 billion (EPS: PKR 16.87) in 9MCY11, translating into modest 8%YoY growth. Alongside the result, AKD Securities expects MCB to announce a cash dividend of PKR 4/share, bringing cumulative 9MCY12 payout to PKR 11/share. Key highlights of upcoming 9MCY12 result are expected to be 1) 6%YoY NII decline due to higher deposit costs post increase in savings a/c floor to 6%, 2) a 72%YoY decline in loan provisions as NPL stock has stabilized and coverage appears adequate and 3) robust 27%YoY growth in non-interest income driven by higher fees, dividend income and capital gains. While pension fund reversals are no longer a swing factor, possible high capital gains (no bank’s own basis and by associate AICL) hold the potential for +ve earnings surprises, in AKD Securities’ view. On a sequential basis, AKD Securities expects MCB to post NPAT of PKR 5.33 billion (EPS: PKR 5.80) in 3QCY12, up 9%YoY but lower by 7%QoQ where the latter should arise on the back of lower NII (tighter NIMs). Having gained 50%CYTD (vs. a 40% gain for the KSE-100 Index), MCB trades at a CY13F P/B of 1.44x, P/E of 7.5x and D/Y of 7.9% where AKD Securities’ target price of PKR 185/share implies a Neutral stance.