Karachi Stock Exchange: Cenment Sector Analysis

Cements: Dark Clouds

• Our channel checks confirm that Lucky Cement, the largest cement manufacturer in Pakistan, has resigned from APCMA.
  
  
• We believe that this may be in connection with the recent power tariff increase and disagreements among cement manufacturers related to passing on of cost increase.
  
  
• This may have detrimental effect on cement price unless issues among APCMA members are resolved.
  
  
• Historically  speaking,  issues  among  cement  manufacturers  led  to  price  wars  and  a  risk  of  that  happening  again  might  be  evident from recent events.
  
  
• We advise caution at current levels and will revisit our investment case on the cement sector.
  
  
• We have done a sensitivity of cement price on earnings of Elixir’s cement universe below.