Local Cement off-takes rising while exports falling during 9MFY12 – Alfalah Securities Limited

Karachi: According to the data released by All Pakistan Cement Manufacturing Association (APCMA) recently, local cement off takes have surged by 8.4%YoY to 17.386 million tons during 9MFY12 as against 16.040 million in the corresponding period last year, mainly due to increased construction activities across the country in the current financial year and disbursement of PkR 144.3 billion against an allocated target of PkR 300 billion in the Public Sector Development Programme (PSDP), which remained low during FY11.

According to Alfalah Securities Limited, local off takes in the month of March 2012 only were recorded to surpass the level of 2.55 million tons, depicting an increased demand of cements in the country.

On the other hand, export sales have dropped by 7.77%YoY to 6.243 million tons during the 9MFY12 period as compared with 6.769 million tons in the same period last year, mainly due to lesser demand of cements across the region owing to prolonged winter season and a drop in exports through the sea-route. Likewise, Cement exports during March 2012 also registered a YoY drop of 23.7% to 0.625 million tons as compared to 0.820 million tons in March 2011.

Alfalah Securities Limited believes the local off-takes would continue to pick up at a steady pace mainly due to the election year coming up where the government may allocate additional development funds to gain popularity among the masses, and the manufacturers would also like to reap the benefits of higher cement prices, which are currently hovering at PkR 425/bag despite a drop in international coal prices. Alfalah Securities Limited recommends a “Buy” stance on LUCK at current levels as it trades at a FY12E P/E of 5.83x.