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Analysis of Cement Sector in Pakistan focusing Lucky Cement Ltd

Analysis of Cement Sector in Pakistan focusing Lucky Cement Ltd

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Published by M Faisal Panawala
Research report on cement sector of Pakistan focusing Lucky Cement Ltd (KSE: LUCK) largest cement producing company of Pakistan.
Research report on cement sector of Pakistan focusing Lucky Cement Ltd (KSE: LUCK) largest cement producing company of Pakistan.

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Published by: M Faisal Panawala on May 08, 2009
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07/09/2013

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Suite #001Business Finance CentreI.I Chundrigar RoadKarachi.Ph: 021-2440xxx
Sample Securities (Pvt.) Ltd
Corporate Member Karachi Stock Exchange (G) Ltd
 SaturdayMay 31 ‘08Research AnalystM. Faisal PanawalaCell: 0321-2956003fpanawala@hotmail.com 
RESEARCH REPORT ONCEMENT SECTORFOCUSING
LUCKY CEMENT LTD
 
Content
Particulars Page No.01 Overview Cement Sector
 
Future Outlook Sales & Growth…………......... 1
 
Hike in Cost……………………………………... 1
 
Export Demand & Expansions………………….. 1
 
Final Word…………………………………......... 2
02 Lucky Cement Limited
 
Expansions…………………………………......... 3
 
Exports…………………………………………... 3
 
Operation Results………………………………...3
 
LUCK Highlights………………………………...3
 
GDR Issue of US$ 109.3mn…………………….. 3
 
Recommendation………………………………... 4
03 Pivot Analysis
………………………………………5
This report has been prepared by Sample Securities (Pvt) Ltd – (SSPL) and is provided for informationpurposes only. As a result, investors should consider this report as a single factor in making theirinvestment decisions with out undue reliance on this report and the company accepts no responsibilitywhatsoever for any direct or indirect consequential loss arising from any use of this report or itscontents. The views expressed are of research department & do not necessarily reflect those of SSPLdirectors.
 
Industry Overview
Future Outlook – Sales & Growth
The robust growth of 32% cement demand both in domesticsand export markets during FY ‘07, continued as cumulativedispatches for 10 months FY ’08 showed an increase of 25%.Total domestic consumption grew by 1% YoY while exportsgrew by whopping 157% YoY.
Hike in Cost
The industry debt to asset ratio is 60%, the recent volatility ininterest rates is likely to affect the finance cost significantly.However companies including DGKC, LUCK & MLCF haveentered into interest swap agreements linked to Libor.On the other hand coal prices in Intl’ markets have reached toUS $142/ton during Feb ‘08 which were US $80 last year,increasing cost by PKR 32 per 50kg bag and oil pricessoaring at US $133/barrel have increased the cost of production.
Hike in Prices
The price increase of PKR 40-45 per 50kg bag during theyear, due to impact of rising coal & fuel prices, have beenpassed on to consumers which indicates margins are expectedto remain intact in the short term.Cement Sector MKT CAP
PKR 118.66bn
Cement Sector MKT CAP
US$ 2,221mn
Cement Sector Weightage in KSE 100
3.02%
Capacity Utilization
90%
Cement Sector FY’07A FY’08E FY’09E
PAT Growth
-32% 19% 28%
EV/ton US$ mn
$ 147 $ 93 $ 89
EV/EBITDA x
11.2 6.5 4.9
ROE
14% 13% 16%
Source: FCEL report on cement sector
 
Export Demand & Expansions
Local cement dispatches registered 7% growth at 20.6mn tonsduring 11months FY ’08. Demands from Mid Eastern &African countries gave significant boost to production whichstood at about 24m tons in FY ’07 and export revenues stoodat $23m in Jan ’08. The upward trend in cement demand islikely to continue for years to come as UAE finds it costeffective to import cement from Pakistan.
Synopsis
 
Sector P/E 11.5Capacity
in tones
37mnLocal demand 30.4mnExport demand 7mn9M FY ’08Production
 
in tones
21.9mn9M FY ‘ 08 Growthin % 24.79%Domestic 8.68%Export 140.24%No. of Companies 22
Production Output
21%12%8%59%
LUCKDGKCMLCLOTHERS
 
Page 1
According to FY ’06-07
Pakistan’s Cement Sector Analysis Sample Securities (Pvt) Ltd

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