Cement Companies In Pakistan Are Poised For Growth, Here’s What Sets Lucky and DG Khan Apart 1

Cement companies in Pakistan are poised for growth….

For a long time, the cement industry in Pakistan (PAK) has been dependent upon exports, but this is now changing with growing domestic demand. Pakistan’s construction industry is currently thriving. This has enabled local cement companies in this Asian (AAXJ) (VPL) emerging market (EEM) (VWO) to increase their capacity utilization rates (now close to 88%). Growth in the cement sector in Pakistan is, therefore, underpinned by healthy domestic demand.

…backed by domestic demand

Demand rose by 6.9% for the nine months ending March 2017. More than half a dozen cement companies are going through an expansionary phase with combined investments of over $1.5 billion. Lucky Cement, DG Khan Cement, Cherat Cement, Power Cement, Attock Cement, and Bestway Cement, among others, have already announced expansion plans expected to commission over the next 2-3 years.

Fund manager top 2 picks

Thomas Hugger, chief executive officer and founder of Hong Kong-based Asia Frontier Capital (AFC), identified 2 companies that stand apart from the lot. The frontier markets fund manager is currently bullish on Lucky Cement (LUCKY) (PSX: LUCK) and D G Khan Cement Company Ltd (KSX: DGKH) from a corporate governance perspective.

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Lucky Cement

Lucky Cement (LUCKY) (PSX: LUCK), the second largest cement company in Pakistan, will be expanding the capacity of its Karachi cement works by 1.25Mta (million tpy) in a $30 million project. This is in addition to the proposed 2.3Mta capacity expansion at its new greenfield cement plant in Pakistan’s Punjab province. The company recorded 8.4% rise in sales for the nine months to March 2017.

DG Khan Cement

DG Khan Cement’s (PSX: DGKC) $300 million Hub cement plant in Balochistan is progressing well with commissioning scheduled for 2018.

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