By: Foundation Securities Limited
Imposition of anti dumping duty in South Africa is to have a more profound impact on Attock Cement Limited (ACPL) compared to industry players, in our view. Our view is premised on imposition of higher duty (63%) in ACPL’s major export market (South Africa constituting ~35-37% of exports). In the worst case scenario, the development would chip off ~15% of FY16E EPS, but we see partial divergence of exports to restrict the full blown earnings impact.
Subsequently, we trim our FY15-17E earnings by 5-7% which reduces our Dec’15 TP by 7% to Rs202.5/sh. Trading at FY16E PE of 8.9x, we reiterate our Neutral stance on the stock.
Impact: Anti dumping duty in South Africa – a key concern: Much awaited decision on anti dumping duty in South Africa on cement has been finalized. The overseas authorities have imposed duty ranging 14-66% (above market’s consensus) for the next 6mths. Note that a permanent duty structure will be formulated after the said period. Though it will drag the entire sector’s exports, we see the impact to be more visible on ACPL.
Imposition of higher duty (63%) in ACPL’s major export market, constituting ~35-37% of company’s exports, strengthens our view on the said negative earnings impact. Note that the duty imposition would reduce the incentive for ACPL to continue exporting to South Africa, in our view.