LAHORE (PPI) - While YTD FY11 local cement sales are lower by 8 percent, Feb 2011 offtake numbers reflect initial signs of recovery. In experts view, a MoM decline of 7 percent in local sales is largely due to fewer working days during Feb. On the other hand, exports in Feb rose by a significant 6 percent and 25 percent MoM led by improving weather conditions in neighboring Afghanistan. Experts eye run rate for local dispatches to improve from Mar onwards, driven by improved farmers liquidity. Historically, the period between Mar-Jun has contributed 37 percent to the industrys full year sales. We maintain our 'Market-Weight outlook on the sector, with Lucky Cement (LUCK) and DG Khan Cement (DGKC) as our preferred plays in the sector. In experts view, fewer working days in Feb (28 days in the month with 2 public holidays) led to a 7 percent MoM decline in local sales. According to our analysis, sales per working day have actually risen by 4 percent MoM. On a YoY basis sales remained flat, however, unprecedented floods during Jul-Aug caused YTD FY11 sales to decline by 8 percent YoY to 13.79m tons. We expect local dispatches to improve from here onwards due to improving weather conditions and better farmers liquidity amid winter harvest. To highlight, Mar-Jun period is the strongest period for local offtake, contributing 37pc to full year sales. After a disappointing Jan, exports sales recovered by a significant 6 percent and 25 percent MoM to 0.71m tons led by increased sales to Afghanistan, which were recorded at 0.37m tons, up 46pc and 104pc. However, unattractive price levels in other countries for local manufacturers, particularly those placed in the North, led YTD FY11 exports to decline by 15pc. . percent YoY to 5.9mn tons. Eyeing potential uptick in demand from March onwards, we expect local sales to settle at 23mn tons, down 2 percent YoY. However, we anticipate export sales to witness a larger decline of 16 percent YoY due to slowdown in global demand and commissioning of new capacities in the region. We maintain LUCK and DGKC as our top picks in the sector due to the recent recovery in local cement prices. LUCK trades at an FY12F PE of 5.5x while DGKC is available at only 0.3x times its book value. Total dispatches dropped by 11 percent YoY to 14.74m tons in 1HFY11 in contrast of 16.59m tons last year. Local and export dispatches stood 10.11m and 4.63m tons respectively. Monetary sales posted a growth of 8 percent YoY to PKR39.82bn. PBT of the sector declined by 63 percent YoY to PKR298.51m in 1HFY11. We recommend a BUY stance for the LUCK, DGKC and ACPL with a Fair value of PKR85, PKR39 and PKR69 respectively.