Karachi, December 04, 2013 (PPI-OT): Volumes depict marginal (2% YoY) drop in Nov’13
Provisional dispatches reveal 2% YoY, 6% MoM fall in Nov’13
As per the provisional figures (27-day extrapolated) available with us, cement dispatches appear to have posted a 6% MoM drop in Nov’13 to 2.6mn tons, mainly on account of 3% MoM drop in domestic demand along with 16% MoM attrition in export volumes.
According to Arif Habib Limited, unsurprisingly, start of winter appears to be the major culprit behind the MoM fall in the overall cement dispatches.
Cement Dispatches (000) tons Nov-13 Oct-13 MoM Nov-12 YoY 5MFY14 5MFY13 YoY North 2,047 2,226 -8% 2,164 -5% 10,423 10,540 -1% Local 1,684 1,726 -2% 1,620 4% 7,799 7,736 0.8% Exports 363 500 -27% 544 -33% 2,624 2,805 -6% South 551 541 2% 485 13% 2,292 2,586 -11% Local 339 360 -6% 340 -0.2% 1,388 1,748 -21% Exports 211 180 17% 145 45% 904 838 8% Total Local 2,023 2,086 -3% 1,960 3% 9,187 9,484 -3.1% Total Exports 574 680 -16% 689 -17% 3,528 3,643 -3.2% Grand Total 2,597 2,767 -6% 2,649 -2% 12,714 13,127 -3.1% Source: APCMA, AHL Research
Only a modest 2% YoY fall in Nov’13
A YoY analysis on November reflects a better comparison by ignoring seasonal impact, suggesting only 2% YoY fall in total dispatches to 2.6mn tons. Interestingly, domestic demand is expected to have posted a 3% YoY recovery to 2.0mn tons, while exports are to suffer a 17% YoY fall to 0.57mn tons (breakup alongside).
Cement prices still inching up …
Contrary to the market rumours yesterday, Arif Habib Limited continues to reaffirm Arif Habib Limited’s positive stance towards the cement pricing scenario in the domestic market. Cement prices in the domestic market continue their upward march, posting a PKR 20/bag (4%) increase since the start of FY14, with further increase still to come. As Arif Habib Limited already highlights in Arif Habib Limited’s earlier write-ups that, though much of the price rise was to pass on the impact of increased GST, change in GST regime and rising power tariff, the hike is contributing towards strengthening margins of the cement manufacturers, especially ones having gas-based power generation (LUCK, DGKC, and MLCF).
While major fuel component (coal) in steady mode
Once having crossed USD90/ton mark for a brief period back in Oct’13, coal in the int’l market has stabilized around USD83/ton, while the average has clocked in at ~USD76/ton since Jul’13 to date (FY14TD). Even though prevailing coal prices stay higher than the period average, it is pertinent to mention that, on YoY basis, coal prices are still considerably down 12% against last year same period. Arif Habib Limited sticks to Arif Habib Limited’s coal price assumption for FY14 at USD80/ton (still conservative) as the recent coal price uptick is expected to be realized in the next two quarters (by 4QFY14).
KOHC, DGKC and FCCL remain Arif Habib Limited’s top picks
Arif Habib Limited reiterates Arif Habib Limited’s positive stance towards the sector with more likeness towards KOHC, DGKC and FCCL at Jun-14 price targets of PKR 123, PKR 110 and PKR 16.4, offering massive 47%, 43% and 21% upside, respectively, from current levels.