Pakistan

23 August 2004

The Cement Hoopla!

SECTOR REPORT

Cement Sector

Underweight

Unless Pakistanis start eating cement, the potential cement supply

demand gap is unlikely to vanish over the next 3-4 years. We believe
that the current cement story needs to be analyzed from both demand
and supply perspectives instead of only arguing on the demand side.

The demand side is positive, however, one should not base ones view
only on the basis of the governments planned projects. Similarly, there
is a big difference between the hype and the reality of demand from
the private sector.

The cement manufacturers are forcing themselves into a situation that is

similar to the one that existed in the early 90s. We foresee at least 15mn
tones of additional cement capacity over the next three years.

The current retentions are healthy for the cement manufacturers

however, these are unlikely to be sustainable in the long run owing to
various reasons.

The FY05 budget carried a positive message for the cement sector;
however, investors should not read too much between the lines.

The cement sector is a relatively risky sector compared to the market.

Its high beta and poor quality of earnings deserves a below market PER.

The sector has been extremely cruel to small investors. The payouts
have been ridiculously low and we expect this trend to continue in
future.

Except for Maple Leaf Cement, we recommend a SELL on most of the

cement stocks at current levels.

Analyst
Shagufta Irshad
sirshad@kasb.com
(9221) 2635501-10 ext 335

For Analyst Certification, see Page 12

Refer to important disclosures at the end of the report.
Investors should assume that KASB is seeking or will seek investment banking or other business
relationships with companies mentioned in this report.
KASB Securities (Pvt.) Limited
6th Floor, Trade Center, I.I. Chundrigar Road
Karachi.

Phone Number 111-222-000

research@kasb.com
www.kasb.com

Cement Sector 23 August 2004

Executive Summary
The Cement Hoopla!
The general opinion of researchers regarding the
outlook of the cement sector appears to be
divided. However, a clear tilt is visible on the
positive side since most analysts are only getting
support from the demand side. On the other
hand, APCMAs data releases are misleading
and tend to impress punters with (I) inflated
capacity utilization numbers, and (II) low priced
stocks hysteria. Similarly, medium to long-term
investors are not paying significant attention to
the exceptionally higher valuation multiples of
the sector, whereas this sector needs to be
valued at a multiple lower than that of the
market. The so-called futuristic earnings
growth appears to be overriding all other
valuation tools. At the same time, investors are
also under the impression that the higher
earnings will translate into higher dividends,
even though history has a totally different
message for investors.

Positive Outlook on Demand side, But

The demand side is positive, however, one
should not fully base ones view on the basis of
the governments planned projects. Similarly,
there is a big difference between the hype and
the reality of demand from the private sector.
We expect cement demand to witness 11.88%
growth (5 years CAGR) over the next 5 years.
Even though we believe that the momentum of
cement growth will eventually slow down, we
are assuming that the current growth rate in
cement demand will continue in medium term.

Supply side has its own and bigger

issues!
The
cement
manufacturers
are
forcing
themselves into a situation that is similar to the
one that existed in the early 90s. We foresee the
existing production capacity of the industry
increasing by 16% over the next 5 years, which
will cause an excess supply of 15mn tones in
2007 under the best case scenario, while the
actual supply demand gap is likely to be more
than 17mn in 2007.

The current retentions are Healthy

The current retentions are healthy for the
cement manufacturers, however these are
unlikely to be sustainable in the long run owing
to various reasons. The cartel is functioning very
fairly and everyone, irrespective of efficiency, is

getting a share in the pie. Having said this, we

feel that this could be the biggest potential
weakness of the current arrangement.

Budget 05- Dont read too much

The overall budget carried a positive message
for the cement sector with a mixed bag of
incentives and disappointments; investors should
not read too much between the lines. An
allocation of PkR202bn for PSDP, out of which
PkR87bn would be allocated for infrastructure
development is likely to boost cement demand
but largely in qualitative terms. While the
government has not announced any further
reduction in CED, a number of measures have
been announced to boost housing activity.
However, these measures are not sufficient
enough to give a real boost to construction
sector due to a drastic increase in input costs.

No concept of Profit Sharing

The sector has been extremely cruel to small
investors. The payouts have been ridiculously low
and we are of the view that the managements
will continue their past practice and will retain
most of their earnings to either repay their loans
or to redeploy these monies into their groups.

Deserve a Lower PER than Market

In our view the cement sector is a relatively riskier
sector compared to the market. Its high beta
and poor quality of earnings deserve a below
market PER. Owing to negative earnings in the
past, it is difficult to prove this point through
tracking historical relative PER of the sector.
However, sectors price beta provides a useful
insight of this factor. Last 5 years sector beta is
1.2x, which means that sector is 20% riskier to the
market. Thus the sector should be trading at a
proportionate discount to the market PER
however, at present the sector is trading close to
the market PER. Thus we are changing our
Neutral stance on the sector to Underweight.
The speculative newsflow generated by the
APCMA may cause temporary price hikes in the
sector, which will stay exposed to extreme
volatility in any market downturns. We also
expect long-term investing grade money to stay
away from this sector.

What about Cement stocks?

We do not like most of the cement companies.
In our view most of these companies are trading
towards the higher end of their DCF based
valuation ranges. Maple Leaf Cement can be a
good bet if investors want to take exposure in
cement. Our DCF based Fair value of
PkR43.99/share for Maple indicates a potential
upside of 14% from current levels.

Cement Sector 23 August 2004

Contents
Section

Page

Executive Summary

2
1. The Cement Hoopla!

2. Positive Outlook on Demand Side but

3. Supply Side has its own and Bigger

issues!

4. The Current Retentions are Healthy

10

5. Budget 05- Dont read too much between

the line

11

6. No Concept of Profit Sharing

12

7. Deserve a Lower PER than market!

13

8. What about Cement Stocks?

14

Buy Maple Leaf!

Cement Sector 23 August 2004

The Cement Hoopla!

The general opinion of researchers regarding the outlook of the
cement sector appears to be divided. However, a clear tilt is visible
on the positive side since most analysts are only getting support
from the demand side. On the other hand, APCMAs data releases
are misleading and tend to impress punters with (I) inflated
capacity utilization numbers, and (II) low priced stocks hysteria.
Similarly, medium to long-term investors are not paying significant
attention to the exceptionally higher valuation multiples of the
sector, whereas this sector needs to be valued at a multiple lower
than that of the market. The so-called futuristic earnings growth
appears to be overriding all other valuation tools. At the same time,
investors are also under the impression that the higher earnings will
translate into higher dividends, even though history has a totally
different message for investors.
The greedy punters, functioning of an illegal cement cartel,
speculative APCMA reporting and sensational research journalism
equally fueled the current cement sector hype. Agreed the sector
has seen a massive re-rating over last two years, this adjustment was
due and its over now. From here onward, any further re-rating is
impossible given the recent expansions announced by the industry.
Unfortunately retail investors are not willing to accept reality. They
are still maintaining their faith in the sector and are dreaming about
the continuation of the sectors past performance in the future.
Though market has been hovering around the 5100-5600 range for
quite some time, the cement sector investors have lost their shirts in
the nearly 20% up and down rallies in the cement sector.
Each one of the cement investors is still hoping to see the
materialization of the two dams, Bhasha and Kalabagh without
realizing the basic fact that the present government will never be
able to develop a national consensus on these in the present
atmosphere. Talking specifically about private sector demand, real
growth cannot be seen till the land prices come to a level where
everyone can afford a house. Nearly 400% increase in land prices
simply means that only a few can afford houses.
On the other hand, the manufacturers are about to exploit the
cement investors passion by making cash calls. During our
discussion with various cement companies, the managements
revealed details of capital calls. We are crystal clear in our belief
that these cash calls will be death traps for the smaller shareholders
in the medium to long term. There will be significant earning
dilutions along with negative incremental returns.
We are not advocating that our investors dump the cement sector.
Undoubtedly the sector has growth potential and is well poised for
decent growth in line with its previous correlations with the
economy. However, there is always a price attached to every
investment opportunity. The market has overly priced the growth
story in cement. And there is a need for an adjustment. How will this
adjustment take place? We foresee a whole set of triggers for this
de-rating in the future. Slowdown in cement demand growth
(eventually), more capacities, non-materialization of large dams
and poor payouts from the managements can be the triggers.

Cement Sector 06 Aug

23 August 2004

Unless We Start Eating Cement!

Unless Pakistanis start eating cement, the potential cement supply
demand gap is unlikely to vanish over the next 4-5 years. We
believe that the current cement story needs to be analyzed from
both demand and supply perspectives instead of only arguing on
the demand side.
The following factors are responsible for the widening supply
demand gap:

! Expansions

The speculative bubble in the Cement sector is likely to explode by

FY07 when overall cement supply will be increased to 35mtpa with
the completion of the expansion plans announced by the cement
manufacturers as opposed to expected demand of 18mtpa,
thereby reducing the capacity utilization rate for the year to 56%.
This situation is expected to get even worst by FY09. In our
calculations, we are incorporating only the announced and duly
approved expansions of the respective companies.

! Allocation for PSDP will eventually be diversified!

The current upsurge in cement demand from the public sector is
misleading from a longer-term perspective. The massive allocations
for physical infrastructure development in the budget will eventually
be diversified to other components of government spending. Also
one needs to understand that PkR82bn physical infrastructure
spending does not mean that the entire amount will be spent on
buying cement.
! Increasing Cost of Construction

Despite the incentives announced in the budget, sky-high real

estate prices, higher cement, steel and paints prices and higher
labor costs have slowed construction activity in the country. In our
view, this will remain a limiting factor in the medium to long term
unless the government improves regulations to curb such illegal
trade practices.

! Best case scenario also shows a 44% supply surplus

Our best-case scenario indicates that the Pakistani market will retain
a demand surplus to the tune of 44% by FY07. We are assuming 12%
growth (5 years CAGR) in local cement demand over the next 5
years, 10% annual increase in export sales and 0.75mtpa extra
consumption for the Mangla expansion and the Bhasha Dam.

Cement Sector 23 August 2004

40

80%

35

70%

30

60%

25

50%

20

40%

15

30%

10

20%

10%

0%
2004

2005
Supply

2006

2007
Demand

Source: Industry Sources, KASB Estimates

2008

2009

2010

Utilization Rate

Utilization Rate

mn tonnes

Chart 1: Supply Demand Situation

Cement Sector 23 August 2004

Positive Outlook On Demand Side, But

The demand side is positive, however, one should not fully base
ones view on the basis of the governments planned projects.
Similarly, there is a big difference between the hype and the reality
of demand from the private sector.

! 12% is the growth target in best case scenario

We expect cement demand to witness 11.88% growth (5 years

CAGR) over the next 5 years. Even though we believe that the
momentum of cement growth will eventually slow down, we are
assuming that the current growth rate in cement demand will
continue in the medium term. Having said this, we feel that the
chances of a demand growth slow down are more than the
chances of a further increase in momentum.

! Long-term growth trend will be in line with GDP Growth

Cement demand is strongly correlated to GDP growth. Pakistans

GDP grew by 6% in FY04. The main source of Pakistans GDP is
agricultural output, which comprised around 23.3% of GDP in FY04.
Pakistan has entered into an era of high economic growth, which
leads us to expect 6.5-7.5% growth in GDP and 4-6% growth in the
agricultural sector over the next 3 years depending upon the
availability of water and the fertilizer consumption situation.
Chart 2: GDP Growth and Cement Demand Growth Rate
50%

Growth Rate

40%
30%
20%
10%
0%
-10%

93

94

95

96

97

98

99

00

01

02

03

04

-20%

Cement Demand grow th

GDP grow th

Source: Economic Survey 2003-04

With the current upturn in the domestic economy, we expect

cement demand to ultimately follow the GDP growth momentum
eventually.

The qualifications for our best-case scenario

Even though for this note we are assuming that the best-case
scenario will emerge in the future, we want to still highlight a few
shortcomings of our best-case scenario:

! Public Sector

The public sector appears to be dominating the demand side at

this point in time. The governments current focus on building the

Cement Sector 23 August 2004

countrys physical infrastructure and the largest ever increase in the
PSDP allocation will have positive impacts on demand. However,
this demand is difficult to quantify at this juncture. Moreover, this
demand factor is largely dependent upon the governments
performance on achieving national consensus on the mega
projects. Thus, the large PSDP allocation should not be taken as a
very sound bullish argument for the cement sector.

! Private Sector

Thanks to easy liquidity and improving economic conditions private

sector construction is another positively contributing factor on the
demand side. However, soaring land prices, sky rocketing steel
prices and the reluctance of bankers to go beyond first tier clients in
the case of house financing has slowed the upward growth
momentum in demand.

! Exports

Though the recent surge in UAE cement prices and the exceptional
growth in neighboring countries have created a small window of
opportunity for Pakistani cement in Afghanistan and the UAE, we
feel that investors need to focus on the quantum of exports rather
than MoM or YoY growth in exports. Furthermore, the UAE can not
be considered a potential export market for Pakistani cement in the
long term owing to: (I) Saudi Arabia, Iran and Qatar are planning to
double their production capacities by FY07; and (II) Pakistan does
not produce high quality cement that can be used in mega
housing and infrastructure projects in the UAE. We are of the opinion
that the said opportunity will only improve the profit margins on the
exported products to the level that has been achieved in the case
of local products otherwise there will be no significant impact on
the sector as a whole.

! Bhasha Dam Turning Controversial!

Under the best-case scenario, we have assumed the timely

implementation of Mangla Dams raising and the construction of
the Bhasha Dam. Bhasha Dam is turning out to be controversial,
owing to: (I) The project is not ideally located for power supply
arrangements as opposed to Kalabagh, (II) Punjabs position that
Bhasha should not be considered a substitute for Kalabagh, which
will not be beneficial for irrigation purposes, and (III) Sindh also has
certain reservations regarding the Dam and strongly supports the
Skardu and Katzarah dams instead. These controversies could delay
the process of launching a detailed design for the dam that would
require at least 24months to complete, which will eventually result in
a loss of potential demand for cement leading to an ever
increasing supply demand gap.

Cement Sector 23 August 2004

Supply side has its own and bigger issues!

The cement manufacturers are forcing themselves into a situation
that is similar to the one that existed in the early 90s. We foresee at
least 15mn tones of additional cement capacity over the next three
years.
Two courses of action have been planned by most of the cement
manufacturers. One, most of the companies are opting for the debottlenecking of their existing plants to gain further capacities; Two,
all the major cement plants are also going for capacity expansions.
Two thoughts are prevalent in the cement players minds: (I)
additional capacities would mean a higher quota allocation in the
cartel driven supply management structure; (II) the current
operating environment is conducive for taking new investment
initiatives owing to lower interest rates and higher repayment
capacities.
Chart 3: Cement Supply Side
40
35

mn tonnes

30
25
20
15
10
5
2003

2004

2005

2006

2007

2008

2009

2010

Source: Industry Sources

If one looks at the future capacity numbers released by APCMA

and the cement companies, the total additions will be to the tune
of 15mtpa, which will take local cement capacity from 20mtpa to
35mtpa in 2007. In terms of the timing of these expansions, these are
well spread and will crop up every year. One cannot rule out the
possible slippage in a few capacities on account of late thoughts,
nevertheless the final tally of the capacities will be over 37mtpa by
2009.
We foresee the existing production capacity of the industry
increasing by 16% (5 year CAGR) over the next 5 years, which will
cause an excess supply of 15mn tones in 2007 under the best case
scenario, while the actual supply demand gap is likely to be more
than 17mn in 2007.

Cement Sector 23 August 2004

The Current Retentions are Healthy

The current retentions are healthy for the cement manufacturers,
however these are unlikely to sustain in the long run owing to
various reasons.

! The Cartel is itself the biggest threat to the present scenario!

Undoubtedly the effective functioning of the cartel has improved

manufacturers retentions significantly. The cartel is functioning very
fairly and everyone, irrespective of efficiency, is getting a share in
the pie. Having said this, we feel that this could be the biggest
potential weakness of the current arrangement. Efficient players will
want a larger share and this urge will force them to break the cartel.
This is a natural phenomenon and will happen eventually, affecting
retentions negatively. While the efficient players will gain from
increased volumes, the second and third tiers will suffer due to their
relative inefficiencies.

! Government interventions to curb illegal practices

Though the government has yet to come up with any measures

against the working of the cartel, various stakeholders have been
raising their voice against this practice. In fact, even government
agencies have raised their concerns over this issue. We are of the
view that the government will also address this issue eventually. Our
argument gets support from the governments action against the
auto assemblers, who have been involved in similar tactics.

! 100% increase in Coal Prices

The 100% rise in coal prices will have a negative impact on retention
levels. Coal prices have surged to almost double in a few months.
Local coal prices have increased from PkR1400/ton to PkR3000/ton
while imported coal prices have increased from US$33/ton to
US$68/ton. Thus the net advantage from converting to coal is
gradually vanishing. While there is a general cry that the cement
makers should increase retail prices to mitigate the impact of higher
coal prices, the cement producers cannot transfer such a burden
to the end consumers due to the fact that they have not passed on
the benefit earned from a substantial reduction in production costs
from the conversion to coal to the consumers in the first place.

! No further reduction in CED

The government has not announced any further reduction in Excise

Duty on cement in the budget, which will have a negative impact
on the sector in terms of lost potential retention level.
While we do believe that the retentions of these cement
companies will come down from current levels, we are not
assuming any such reductions in our earning forecasts. We just want
to highlight the basic fact that the cement companies are not
worth their existing prices even in the best-case scenario.

10

Cement Sector 23 August 2004

Budget 05 Dont read too much between the lines!

The overall budget carried a positive message for the cement
sector with a mixed bag of incentives and disappointments;
investors should not read too much between the lines.

! Higher Allocation to PSDP but

An allocation of PkR202bn for PSDP, out of which PkR87bn would be

allocated for infrastructure development is likely to boost cement
demand but largely in qualitative terms. The demand factor is
largely dependent upon actual government spending (as 30%
remained unutilized from last years PkR161bn PSDP) on the mega
projects, the implementation of which will remain politically
controversial.

! No More CED Reduction

The government has not announced any further reduction in CED.

The government is also giving indications that the sector will no
more be given more incentives unless the benefits are passed on to
end consumers. The cement makers raised prices by PkR5-15/bag
ahead of the budget on the hope that subsequent price reductions
in line with CED adjustments would not cause any damage to their
price retentions.

! Boost to Housing Sector not likely!

The government in the budget announced a number of measures

to boost housing activity, but these measures are not sufficient
enough to give a real boost to the sector due to the drastic
increase in major input costs including real estate, cement and
steel. The reduction in customs duty on steel and construction
equipment will have a positive impact on the housing sector, while
the abolition of CED on paints and varnishes will not largely
influence the housing sector as it represents only a small fraction in
total construction costs.

! Duty Reduction on Import of Cement Plant

The reduction in customs duty from 10% to 5% on cement plants up

to 4000tpd per unit, not manufactured locally, would not benefit
the industry due to the controversy that a cement plant can be
locally manufactured. While the major expansion plans crossing the
4000tpd limit, including that of DGK and Bestway, would benefit
from the given incentive, this would make these huge expansion
plans more feasible thus worsening the supply demand gap in the
long term.

Cement Sector 23 August 2004

No Concept of Profit Sharing!

The sector has been extremely cruel to small investors. The payouts
have been ridiculously low, which is evident from their dividend
payout history, and we expect this trend to continue in future.
Table 1: Dividend Payout History (PkR)
Year

DGK
EPS

Maple
DPS
1.50

EPS

Lucky

Cherat

DPS

EPS

DPS

EPS

DPS

15.59

1.73

2.62

3.31

1994

5.86

1995

3.91

1996

2.28

1.51

3.46

0.30

1997

0.55

0.21

(0.11)

2.25

0.15

1998

(0.44)

(2.07)

0.10

(0.48)

1999

(4.38)

(3.27)

0.22

1.20

0.20

2000

(0.66)

0.01

0.92

3.36

0.25

2001

(2.91)

(1.58)

1.05

0.75

1.56

0.20

0.75

2.35

2.50

0.75

0.18

1.25

2002

1.67

2003

2.84

1.00

0.87

0.83

1.21
0.93

Source: Company Accounts

The above table clearly indicates the payout policies of the top
cement companies in the past. Even if one wants to challenge us
on the bonus issues made by these companies, the irony of the
situation is that none of these companies has been able to avoid
the dilution in their earnings after opting for bonus issues.
Furthermore, we do not want to give any benefit of doubt to the
managements of these companies, on the basis of poor industry
conditions in the past, as these managements have not shown
exemplary visions while making decisions regarding their aggressive
expansions.
We are of the view that the managements will continue their past
practice and will retain most of their earnings to either repay their
loans or to redeploy these monies into their groups. Thus, small
investors will continue suffering and good quality money will not be
attracted to the sector.

12

Cement Sector 23 August 2004

Deserve a Lower PER than Market!

In our view the cement sector is a relatively riskier sector compared
to the market. Its high beta and poor quality of earnings deserve a
below market PER. Owing to negative earnings in the past, it is
difficult to prove this point through tracking historical relative PER of
the sector. However, sectors price beta provides a useful insight of
this factor. Last 5 years sector beta is 1.2x, which means that sector
is 20% riskier to the market. Thus the sector should be trading at a
proportionate discount to the market PER however, at present the
sector is trading close to the market PER. Thus we are changing our
Neutral stance on the sector to Underweight. The speculative
newsflow generated by the APCMA may cause temporary price
hikes in the sector, which will stay exposed to extreme volatility in
any market downturns. We also expect the long-term investing
grade money to stay away from this sector.
Table 4: Cement Sector PER
30.00
25.00
20.00
15.00
10.00
5.00
0.00
1/2/1999

1/2/2000

1/2/2001

1/2/2002

1/2/2003

1/2/2004

Cement Sector PE

Source: KSE

The negative sector earnings have made it difficult to prove that

sector has been trading at a discount to the market PER. However,
sectors price beta provides a useful insight of this factor. Last 5
years sector beta is 1.2x, which means that sector is 20% riskier to
the market. Thus the sector should be trading at a proportionate
discount to the market PER however, at present the sector is trading
close to the market PER. Thus we are changing our Neutral stance
on the sector to Underweight. The speculative newsflow generated
by the APCMA may cause temporary price hikes in the sector,
which will stay exposed to extreme volatility in any market
downturns. We also expect the long-term investing grade money to
stay away from this sector.

Cement Sector 23 August 2004

mmi_mmi2@yahoo.com
info@mmi2.biz

What about Cement Stocks?

We do not like most of the cement companies. In our view most of
these companies are trading towards the higher end of their DCF
based valuations. Though futuristic earnings growths are overriding
all the investment arguments in these stocks, we feel that these high
beta stocks will become exceptionally volatile when cement
demand starts normalizing. The recent consumption pattern is
already indicating this. Maple Leaf Cement can be a good bet if
investors want to take exposure in cement.
Table 2: Cement Stocks Valuation
SECTOR PE 11.83x

20-Aug-04

COMPANY PRICE FAIRVALUE PE

DG KHAN

CAGR (3yrs) PE/ CAGR EPS(YTD) EPS(FY04E) RATING

56.00

47.35

11.77x

-1.75%

-671.19

3.37

4.76

MAPLE

38.60

43.99

10.92x

CHERAT

78.75

86.08

11.33x

38.14%

28.64

2.48

2.70*

BUY

-9.54%

-118.73

5.36

6.99

HOLD

LUCKY

38.15

41.61

6.43x

35.99%

17.85

PAKLAND

26.55

16.52

-11.82x

-18.56%

63.65

1.80

2.54

HOLD

2.28

2.84

BESTWAY

38.00

39.24

10.39x

0.63%

1640.50

2.43

SELL

3.66

HOLD

ATTOCK

47.00

37.20

13.67x

-47.84%

-28.57

2.59

3.44

SELL

PIONEER

20.35

10.34

7.13x

15.95%

44.72

1.74

2.85

SELL

Source: KASB Estimates

SELL

* Actual EPS FY04

BUY MAPLE LEAF!

We have a BUY rating for Maple Leaf owing to:
(I)
(II)
(III)
(IV)

14

Improved gross margins to 34% as a result of the conversion

to dry process from wet and to coal from oil firing system;
The company has recently re-profiled its expensive foreign
currency debt, which has resulted in a reduction of 27% in
financial charges or a pre-tax saving of PkR117mn in FY04
The Governments decision to build Kalabagh or Bhasha
Dam and raise Mangla Dam will bring a major boost to
Maples cement sales.
Our DCF based Fair value of PkR43.99/share indicates a
potential upside of 14% from current levels. The PER relative
model assigns a fair value of PkR44.30/share. Buy Maple
Leaf!

Cement Sector 23 August 2004

Analyst Certification

I, Shagufta Irshad, hereby certify that the views expressed in this

research report accurately reflect my personal views about the
subject securities and issuers. I also certify that no part of my
compensation was, is, or will be, directly or indirectly, related to the
specific recommendations or view expressed in this research report.

Cement Sector 23 August 2004

All rights reserved. Any unauthorized use or disclosure is prohibited. This report has been prepared and issued by KASB Securities (Pvt. Limited (KASB) The information
herein was obtained from various sources; we do not guarantee its accuracy or completeness. Additional information available.
Neither the information nor any opinion expressed constitutes an offer, or an invitation to make an offer, to buy or sell any securities or any options, futures or other
derivatives related to such securities ("related investments"). KASB, its affiliates, directors, officers, employees and employee benefit programs may have a long or short
position in any securities of this issuer(s) or in related investments. KASB or its affiliates may from time to time perform investment banking or other services for, or solicit
investment banking or other business from, any entity mentioned in this report.
This research report is prepared for general circulation and is circulated for general information only. It does not have regard to the specific investment objectives,
financial situation and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of
investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be
realized. Investors should note that income from such securities, if any, may fluctuate and that each security's price or value may rise or fall. Accordingly, investors may
receive back less than originally invested. Past performance is not necessarily a guide to future performance.
Foreign currency rates of exchange may adversely affect the value, price or income of any security or related investment mentioned in this report. In addition, investors in
securities such as ADRs, whose values are influenced by the currency of the underlying security, effectively assume currency risk.

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