The Engro Polymer & Chemicals Ltd recent capacity expansion of 100,000 tons pa of PVC and 50,000 tons pa of VCM (online since Mar and Jun 2021) enabled EPCL to capture c.94% share of the PVC market in 9MCY21 compared with c.64% in CY20, as it enjoys a substantial competitive advantage in pricing against imports, in experts view.

EPCL is likely to strengthen its presence in the domestic market against imports – with the help of recent expansion, while recent PKR devaluation and global supply constraints are lifting the company’s competitive advantage. Demand for PVC from the private construction activity in Pakistan remains robust, and EPCL has also found new export avenues – promising greater capacity utilization in the future, in our view. However, the margins on exports are lower in comparison with domestic markets. Nonetheless, it can act as a cushion, should domestic construction demand slows down considerably, amid monetary and fiscal tightening shortly and the rising cost of construction (prices of other materials have risen 35-40% on average in the past 15mths).

Courtesy – Intermarket Securities Limite (Abstract of the report)