Resumption in cement exports to Afghanistan witnessed yesterday – AHL Research
By: Syed Abid Ali & Tahir Abbas,
Arif Habib Limited
As per industry sources, the cement exports to Afghanistan via Torkhum border had been halted due to the influx of Iranian cement in Kabul and surrounding regions with competitive pricing. The dealers in Afghanistan were arguing to lower down the cement prices. We have done company-wise analysis that shows in case Pakistani manufacturers lower down export prices, FCCL and KOHC would be the most affected players in the cement industry as their exports comprise 97% and 99%, respectively, to Afghanistan.
Our discussion with the industry channels reveals the aforementioned situation happened in the past as well. The exports to the Afghanistan had been resumed yesterday evening, our channels suggest. Export prices however have been slashed by USD 3.0/ton to increase the competitiveness of Pakistani cement exports in Afghan market. Furthermore, we have run sensitivity with respect to export price and earnings estimate, it shows the annualized after tax impact on AHL Cement universe by the virtue of reduced cement prices by USD 5.0/ton.
Outlook and Recommendation
Currently, we have a ‘Buy’ recommendation on KOHC, LUCK, DGKC and FCCL with Dec-13 target prices of PKR 140, PKR 240, PKR 110 and PKR 15.2 respectively. On the other hand, we maintain our ‘Hold’ stance on ACPL with Dec-13 price target of PKR 149. Furthermore, falling coal prices as observed in the last week as well, to USD 77/ton, along with the price increment in the local market by PKR 35/bag to pass on the GST and transportation impact, would help manufacturers maintain the current margin levels going forward, therefore, we maintain our over-weight stance on cement.