With the coal prices trading at all-time highs, margins of local players are expected to remain under pressure, mainly when government authorities have raised concerns over the previous increase in cement prices. To note, local players need to increase costs by another PkR50-60/bag to pass on the rise in coal prices.

Meanwhile, local cement dispatches for Sep’21 clocked in at 4.0mn tons, up 5.3%MoM, however declining by a mere 1.7% on a YoY basis. Both the regions witnessed a rather tepid month, with North seeing local sales of 3.5mn tons (-2/+10% YoY/MoM) while South witnessed local sales of 0.6mn tons (-15.8% MoM).

· Overall, for 1QFY22, local sales have increased by 4.2%YoY to 11.3mn tons where local sales in North have remained flat at 9.5mn tons while local sales in South have witnessed a significant jump 30%YoY.

· We expect the sector to continue to remain under pressure; however it is an excellent opportunity to accumulate in our opinion where once coal prices ease off, with the other fundamentals intact, the sector will be poised for significant returns.

Courtesy – AKD Research