Karachi: The offtakes of Cement have been witnessed to remain lackluster for the month of October, 2011 at 2.94 mn tons against the offtakes of 2.92 mn tons registered in the same period last year.
According to Alfalah Securities Limited, the data released by the All Pakistan Cement Manufacturers Association (APCMA), local cement offtakes grew by a promising 5.77% to 2.088 mn tons owing to increased construction activities throughout the country whereas, the export cement offtakes dropped down by a significant 9.71% to 0.857 mn tons primarily due to lesser demand in Afghanistan and the Middle East countries. Cement exports to Afghanistan declined by 7.6% YoY to 0.489 mn tons in October while, the exports to India increased by a significant 107.48% YoY to 0.898 mn tons in October 2011. Overall, the cement industry has been utilizing 71% of its installed capacity of 44.217 mn tons which identifies the sluggish demand of cement in the domestic markets.
The prices of major inputs like coal and furnace oil have also increased drastically from USD 75.9/ton to USD 116.3/ton and from PKR 39,137/ton to PKR 60,380/ton respectively, due to which the cement industry has incurred huge operational losses. Alfalah Securities Limited expects the cement industry would continue to penetrate in the local markets and would achieve greater offtakes when the upraising of Mangla Dam and the construction of Bhasha Dam begins. Therefore Alfalah Securities Limited recommends a Buy on Lucky Cement in the sector with Target Price of PKR 102.0.