Cements: Fundamentals remain strong despite budgetary onslaught Pre budget news suggests 1) mixed flows regarding a possible increase GST by 1% to 17%, 2) imposition of 1% import duty on 284 duty free items including coal, 3) a reversal in gradual phase out policy of FED on cements and 4) collection of sales tax on the basis of printed retail price We maintain that while these measures pose substantial cost impacts (PKR40-50/bag), strong demand side fundamentals and price discipline for Pakistan cements indicate that the companies would be able to easily pass on these taxes Back of the envelope calculations indicate gross retail price impact of ~PKR15/bag from GST on printed price on bags. Having said, a host of complexities may hinder implementation of this proposal May13 domestic cement dispatches clocked in at 2.1mn tons, showing a flattish trend YoY, as wheat harvesting season and general elections slowed demand. Also, newly imposed axle load limitations on trucks hindered transportation Going forward, we see strong recovery in Jun13 on the back of complete PSDP utilization (81% of allocation released by Planning Commission during 11MFY13). We maintain liking for underutilized plants, having the most to gain from demand boost: Lucky Cement (LUCK – TP: PKR205), Fauji Cement (FCCL – TP: PKR15) and Maple Leaf Cement (MLCF – TP: PKR26) Report By: Farid Aliani BMA Capital Management Ltd.
Posted on: Mon, 10 Jun 2013 04:02:28 +0000
Trending Topics
Recently Viewed Topics
© 2015