Bilal Hamid

Shahzaib Ali

Cement Industry in Pakistan

• Cement is one of the major industries of Pakistan.

• Cement sector contributes 0.76 percent to GDP while it maintains a weight of 4.41 percent in the overall manufacturing.

• Pakistan Cement Industry has huge potential for export of cement to neighboring countries like India, U.A.E, Afghanistan, Iraq & Russian States.

• The country at present has 29 cement plants with an installed capacity of producing around 39 million tones of cement.

• There has been a robust growth of cement demand seen both in domestic and exports market during the last decade.

Cement Exports

• Pakistan is ranked 5th in the world’s cement exports after a huge increase of 47 percent in exports during last fiscal year.

• Pakistan could achieve the mark of 13 to 14 million tonnes exports by the end of the fiscal year keeping in view Indian market which has once again started importing cement from Pakistan.

Strengths:

• Availability of raw material• Export Market• Cement Industries operating at max capacity• Growing housing demand• Rise in govt. developmental spending• Low labor cost• Duty free port at Gawadar

SWOT ANALYSIS

Weaknesses

• Highly leveraged sector• Plants located very close to each other and tapping the

same market• High oil prices• The stage of industrial development, in most of the

segments, is still at a very low level of technology and the existing industrial base is very narrow and consists of very basic industries such as cement, sugar, textile, cigarette, edible oil, fertilizer, soda ash, caustic soda, PVC etc.

Opportunities• Availability of capacity• Major player moving to coal based power

plant• Taping new geographical areas in foreign

market• Existing export potential is very high• Coal based power plants• Record PSDP allocation (Rs. 621 billion) in

the FY10 budget.• Declining Interest Scenario.

Threats

• Rupee parity on depreciation• Law & order situation• Exchange rate• Power availability• Increase in production cost• Low Domestic Demand• Capacity expansions in Iran and other GCC

countries• Few small factories may shut their plants in

the wake of severe losses.

Main playersCOMPANY NAME SYMB

OLSCOMPANY NAME SYMB

OLS1 AL ABBAS CEMENT AACIL 10 FECTO CEMENT FECTC

2 ATTOCK CEMENT ACPL 11 GHARIBWAL CEMENT

GWCL

3 BESTWAY CEMENT BWCL 12 JAVEDAN CEMENT JVDC

4 CHERAL CEMENT CHCC 13 KOHAT CEMENT KOHC

5 DADABHOY CEMENT DBCI 14 LUCKY CEMENT LUCK

6 DEWAN CEMENT DCL 15 MAPEL LEAF CEMENT

MLCF

7 D.G.KHAN CEMENT DGKC 16 PINOEER CEMENT PIOC

8 DANTO CEMENT DNCC 17 THATTA CEMENT THCCL

9 FUJI CEMENT FCCL      

LUCKY CEMENT• Lucky Cement is the largest manufacturer of cement in

Pakistan, and is also the current market leader in both capacity and sales.

• Lucky Cement is an omnipotent cement plant of Pakistan, and rated amongst the few best plants in Asia.

• It has the capacity of producing 25,000 tons per day of dry process Cement.

• Lucky Cement Company is continuously working towards their plant improvement & fuel efficiency of the plant.

• Lucky Cement aims at producing cement to suit every user.

D.G.Khan Cement • D.G. Khan Cement Company Limited (DGKCC), a unit of

Nishat group, is the largest cement-manufacturing unit in Pakistan with a production capacity of 5,500 tons clinker per day.

• DGKC is one of the market leaders in cement industry, with a market share of 10.5%, second only to Lucky Cement. It is one of the most cost efficient companies in the industry.

• The company manufactures two types of cement: – Ordinary Portland Cement (OPC) – Sulphate Resistant Cement (SRC).

• DGKC is setting up a new cement production line of 6,700 clinker, the single largest production line in the country, first of its kind in cement industry of Pakistan.

• The new plant would not only increase the capacity but would also provide proximity to the untapped market of Northern Punjab and NWFP besides making it more convenient to export to Afghanistan from northern borders.

MAPLE LEAF CEMENT• The production of grey, white and oil well cements by the Company at

3,174,512 metric tons compares favorably to 2,431,352 metric tons in the corresponding period last year.

• The Company made significant dispatches of grey cement and clinker for export. In light of weak domestic demand, the Company is concentrating on building export volumes to achieve higher capacity utilization.

• The basic earnings per share (EPS) Rs. 2.78 in negative for the year ended June 30, 2009 as compared to Rs. 1.96 in negative last year.

ATTOCK CEMENT• The year 2008-2009 is by far the most successful year in the

history of the Company in terms of production, sales and profitability.

• This was the first year after the successful commissioning of Line 2 that the Company was able to achieve 100% production from its new line.

• FALCON as a brand has got immense popularity in the markets of Iraq, Somalia and Djibouti and every effort is now being made to consolidate our brand position in these markets. As far as local sales are concerned, your company has also shown consistency, despite the fact that the overall local demand had shown negative growth of around 14%.

• The Company would supply its products in diverse markets to achieve a healthy and growth oriented sales mix, focus towards a strong presence of its products in all the markets to achieve dynamic financial results, with maximum returns to all the stakeholders.

• ACPL has played a major role and it will continue its contribution in building the nation.

Ratios•Liquidity Position

• Efficiency

• Leverage

• Profitability

• Market worth

• Price-Earning

• Profitability

• SALES

• Change in Market Share Due to high Capacity

Lucky Cement for the following reasons: 

• Considering the continuous improvement in the fundamentals, financial soundness and sustained market leadership, we hereby, prefer to invest in LUCKY CEMENT COMPANY LIMITED.

 • LUCKY CEMENT is currently the market leader in the cement

sector both in term of production capacity and sales and therefore enjoys a huge chunk of total cement exports. The investment preference is based on the following factors:

 •  Continuous expansion accompanied by a growth in sales.

•  Sustained market leadership both in terms of production capacity and sales.

•  Major exporter of cement

• Improved operating performance during the past five years.

We would choose Lucky Cement for the

following reasons: • Declining Debt to Asset ratio, thereby decreasing the financial charges burden.

• Improved Earnings

• Regular Dividend payments

• Low P/E Ratio.

CONCLUSION

• Long Term– Lucky cement would be

appropriate stock with acceptable risk level.

– As the financial result showed lucky has the largest capacity and market share and the industry on increasing there would most probable chance of increase in sale with the increase in overall industry sales.

• Hawked Eye on the Significant Factors – Stable increase in sales in

last 3 years 55%, 35% & 55% respectively

– Degree of Operating leverage is 40%

– Business operating earning risk is 42%

– Cumulative growth of the Lucky is 17% which twice of the industry growth that shows the market penetration

CONCLUSION

• Short Term– Slightly risky stock for

higher returns that Attock cement stock would be suitable stock.

– DGKC attaining the economies of scale that making the company result highly positive.

– Nevertheless Attock has the lowest capacity among the four companies that can create big obstacle in future.

– Moreover, Attock has the shoot up growth that shows the riskiness of the stock

• Hawked Eye on the Significant Factors – Rapid increase in sales by 70

% last year and 9% and 30 % in previous year respectively

– Business operating earning risk 32 % just because of the reduction operating expense which does not seem sustainable in long term

– Cumulative growth of Attock is 14% which gone up because of last year boost, otherwise there no significant growth in the period of boom.

THANK YOU