Karachi, January 05, 2022 (PPI-OT): Pakistan Cement: Seasonality taking a toll on local cement dispatches

Local cement dispatches fell prey to seasonality and stood at 4.1mn tons for Dec’21, declining by 3.0/1.6% YoY/MoM. Region wise, the decline was more pronounced in North with the region witnessing a decline in dispatches of 3.5/2.7% YoY/MoM.

Overall, we expect the local demand to remain strong for FY22 as economic activity continues to pick up where private sector is expected to provide the major support to demand.

Given the current coal prices and delayed pass-on of increased costs by cement players previously, we continue to maintain our stance of pressure on margins in near term (2QFY22 and 3QFY22).

Volatility in coal prices is expected to keep cement sector volatile as well however the aforesaid volatility can provide good entry points into the sector where we maintain our overweight stance, highlighting LUCK (TP: PkR1022/sh, 46% upside), MLCF (TP: PkR58/sh, 57% upside) and FCCL (TP: PkR27/sh, 42% upside) as our top picks from sector.