Equity Analysis /

PAKISTAN CEMENT: Margin pressure is temporary, reiterate BUY on sector

    Vahaj Ahmed
    Vahaj Ahmed

    Head of Industrials Equity Research

    Tellimer Research
    17 April 2018
    Published byTellimer Research
    We estimate that the unit cost of production has increased 7% yoy in 9M 18 (due to higher coal prices and weaker currency) while unit revenue has declined 6% yoy. Cement players finally increased prices in March 2018 and should push for more hikes to sustain Q4 18 margins. Considering strong demand and optimum industry utilisation in the near term, we believe cement players can push prices higher without hurting demand. All our Pakistan cement stocks still offer significant upside potential, hence we reiterate our BUY recommendations on the sector. Company-specific revenue mix, input costs, announced expansions, and contributions from non-core businesses drive the dispersion in the changes to our estimates.