Karachi, August 03, 2021 (PPI-OT): Pakistan Cement: Profitability to decline sequentially for 4QFY21

AKD Cement universe is expected to post PAT of PkR6.8bn for 4QFY21 against LAT of PkR1.5bn reported in 4QFY20 while sequentially, profitability is expected to decline by 49%QoQ as soaring coal prices dent the margins.

For FY21, PAT is expected to stand at PkR30.3bn against loss after tax of PkR4.5bn as fortunes of the industry completely changed after prices improved post conclusion of price competition while demand was also stimulated by various incentives provided to construction sector.

Usage of pet coke for its third line is expected to partially shield MLCF from the impact of soaring coal prices as company’s gross margins are only expected to decline by 2ppts against 6ppts of the industry while LUCK and DGKC are expected to witness biggest drop in profitability sequentially due to high base.

We continue to like MLCF (TP: PkR80.1/sh) and LUCK (TP: PkR1,289.2/sh) from the AKD cement universe with the former being one of the lowest cost producers implying lower sensitivity to retail price variations, while latter’s cost efficiencies coupled with diversified investments make it a safe play.