Tag Archives: AKD Quotidian

AKD Quotidian about — FFBL: 1QCY14 Result Preview

Karachi, April 21, 2014 (PPI-OT): Fauji Fertilizer Bin Qasim is set to announce its 1QCY14 result on Apr 2214. The company is expected to record Net Loss after Tax (NLAT) of PkR197mn, translating into LPS of PkR0.21 as against NPAT of PkR492mn (EPS of PkR0.53) posted during the same period last year.

The loss is likely to stem from massive loss posted by its associate (AKBL) during 4QCY13. During the aforementioned quarter, the associate posted NLAT of PkR1.5bn and with FFBL having 21% stake, loss of PkR320mn will be realized under the head of income from associates.

On the operational front, dispatches are likely to be hampered during 1QCY14, mainly owing to seasonal gas curtailment. AKD Securities expected the company’s DAP dispatches to be down 7%YoY to 88k tons against 95k tons sold during the same period last year while urea sales are likely to be subdued by 37%YoY to 34k tons vs. 54k tons sold during the same period last year.

Owing to these reasons, the company’s top line is estimated to decline by 21%YoY to PkR6.0bn as against PkR7.7bn during 1QCY13. A sliding top line is likely to translate into dampened margins; AKD Securities believes during 1QCY14 the company’s gross margins will be realized at 8%, 13ppt lower than 21% the company posted during the same period last year. At current levels AKD Securities has Accumulate stance on FFBL where the scrip offers 19% upside to AKD Securities Limited’s Jun14 target price of PkR49/share.

EFERT: 1QCY2014 Result Preview

Engro Fertilizers Limited (EFERT) is scheduled to announce its 1QCY14 result on Apr 2314. AKD Securities expects the company to record NPAT of PkR1.81bn (EPS: PkR1.41) vs. PkR646mn (EPS: PkR0.50) in 1QCY13, stellar growth of 183%YoY.

Buoyed by improved production (with additional gas being diverted from Guddu Power plant the company has been operating both its urea plants), AKD Securities believes the company has sold 450k tons of urea as against sale of 299k tons during the same period last year, depicting impressive 51%YoY rise in urea off take. The company’s top line is expected to grow by 39%YoY to PkR13.5bn vs. 9.7bn in the same period last year.

Although price of urea inched up by 4%YoY, ~50% increase in Gas Infrastructure Developmental Cess (GIDC) kept margins at bay. AKD Securities believes gross margins for 1QCY14 will be stagnant at 43%. The company’s finance cost is likely to go down by 14%YoY to PkR1.9bn vs. PkR2.2bn in 1QCY13.

AKD Securities has Reduce stance on EFERT, where at current level the company offers downside of 15%. Outlook: AKD Securities has Market Weight stance on the Fertilizer Sector. In this regard, the sectors hallmark pricing power has been significantly reduced and there are fears within the sector that margins are might not sustain the current levels and can go down if EFERT gets gas at US$0.7/mmbtu and in effect reduces the urea price.

Furthermore, declining intl urea prices coupled with PkR appreciation against the US$ has also pilled pressure on this sectors pricing power, as discount between local and intl urea prices has gone down to 12% from recent high of 26%.

The post AKD Quotidian about — FFBL: 1QCY14 Result Preview appeared first on Business News Pakistan.

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AKD Quotidian about — ICI: 9MFY14 Result Preview

Karachi, April 15, 2014 (PPI-OT): ICI is set to announce its result for 3QFY14 tomorrow. In this regard, AKD Securities expects the company to post sequential growth of 23%QoQ for NPAT of PkR604mn (EPS: PkR6.54) during 3QFY14.

While revenues are likely to remain flat at PkR9,519mn due to a likely sequential slowdown in the Life Sciences business caused by a seasonal slump in seed sales, growth in the bottom-line is likely to be driven by a sharp improvement in the gross margins by 4ppt to 16% with Gross Profit clocking in at PkR1,515mn, up 31%QoQ.

This growth in gross profit is largely due to sharp improvement in the gross margins of the Soda Ash division where the coal boilers became operational during Dec13, as well as a sequential improvement in PSF primary margins due to a sharp fall in feedstock prices. As a result, AKD Securities expects 9MFY14 earnings to clock in at PkR1,438mn (EPS: PkR15.57) as compared to NPAT of PkR1,076mn (EPS: PkR11.65) during 9MFY13.

The 34%YoY growth is due to improved margins as well as lower S and A expenses post the demerger with ICI. Going forward, AKD Securities expects the company to continue with its strong performance led by improvement in the Soda Ash division to post earnings of PkR2,050mn (EPS: PkR22.19) during FY14. In FY15, due to full year operation of coal boiler at the Soda Ash division as well as commissioning of the coal boilers at the PSF plant, AKD Securities expects further growth of 46%YoY in NPAT to PkR3,002mn (EPS: PkR32.51). ICI is currently trading at an FY14F and FY15F P/E of 17.53x and 11.97x.

POL: 9MFY14 Result Preview
Pakistan Oilfields Limited (POL) is scheduled to announce its result for 9MFY14 on Thursday Apr 1714. AKD Securities expects the company to post Net Profit after Tax (NPAT) of PkR10.1bn translating into EPS of PkR42.78 for the aforementioned period, depicting impressive 17% growth on YoY basis. Despite flat international crude oil (Arab light) prices the company’s top line is forecasted to grow by 23%YoY.

This increase in top line is primarily driven by 24%YoY growth in crude oil production and PkR deprecation of 9%YoY. Further support to this impressive top line growth is to be provided by other income which is likely to rise by 7%YoY owing to better payout from subsidiaries (NRL and APL). However, in 9MFY14 AKD Securities expects the company to record 76%YoY higher financing charges which will take away the gloss from an otherwise compressive bottom line. For 3QFY14, AKD Securities forecasts POL to post NPAT of PkR3.2bn (EPS: PkR13.58), representing sequential decline of 3%QoQ.

The company’s top line is likely to record decline of 4%QoQ during 3QFY14, where this decline is mainly attributed to 4%QoQ gain which PkR posted against US$ and 3%QoQ decline in the prices of Arab light. Furthermore, virtually flat hydrocarbon production failed to offset the negativity brought in by PkRs performance against US$ and fall in Arab light prices. Trading at FY14E and FY15F P/E of 9.2x and 8.2x, respectively, the scrip offers upside of 12% to AKD Securities Limited’s Jun14 target price of PkR612/share. The scrip also offers FY14E and FY15F dividend yield of 8.4% and 9.1% respectively.

AKD Quotidian about — Pakistan’s oil sales in FY14 to be highest ever

Karachi, April 11, 2014 (PPI-OT): Marred by sluggish economic performances (5 yr average GDP growth at 2.9% and engulfed by the menace by the menace of circular debt ,Pakistan ‘s oil sales during the past 5 yrs (FY09-13)failed to live up to the precedent set inFY05-08.Such was the magnitude of negativity brought by circular debt that 5Yr volume CAGR (FY08-13) was recorded at just 1% and if it was not for robust MS (motor spirit ) sales during the aforementioned period (5yr CAGR at 17 % ) this growth could well have been in the red zone.

Conversely ,at the time when the industry was shielded from circular debt ,its 3yr CAGR (FY05-08)growth clocked in at an impressive 8% with FO (furnace oil ) leading the way (3yr CAGR at 19% ) .Fast forward to 9MFY14, industry sales growth due to partial resolution of circular debt (leading to higher FO demanded from IPPs) and on –going crisis (making consumers shift towards MS from CNG) has reached 11 % YOY.At that run rate, Pakistan oil sales may reach 21.5mn tons by the end of current fiscal year , at all –time high.

9MFY14 oil sales better off by 11 % YoY : in 9MFY14 we have seen industry selling 13.7 mn tons as opposed to 12.3 mn tons sold during the same period last year .11% YOY growth witnessed during 9MFY14 was primarily due to 16%YOY increase in FO sales to 6.9mn tons while MS sales grew by 22% YoY to 2.8mn tons. Therefore, of 1.3mn tons incremental sales during the aforementioned period ,66% or 0.9 mn tons contribution came from FO. In contrast to this, HSD(high speed diesel ) sales remained unimpressive and virtually stagnant at previous year’s level of 4.8 mn tons.

PSO fails to replicate industry growth: At the time when industry sales growth has clocked in at 11% PSO remained laggard with sales growth of mere 4% YoY . This resulted in the company losing its market share, which from 66% in 9MFY13 fell to 62% in 9MFY14 .This decline is mainly due to dull HSD sales: during the year company faced distribution woes which led to HSD sales declining to 2.6mn tons as opposed to 2.8mn tons , down 7%YoY.

However .7%YoY higher FO sales to 5.1mn tons more than made for the gloom brought in by HSD sales, with summer season all but started, .we believe higher demanded from IPPs will enable PSO to regain some of its lost market share.


PSO 9MFYI4 SaIes
(000′tons) Mar14 MOM 9MFY14 YoY

FO 516 14% 5.072 7%
HSD 221 -4% 2.564 -7%
MS 149 3% 1,371 15%
Others 51 8% 402 -4%
Total 938 12% 8.472 4%

Source: OCAC and AKD Research

Outlook Pakistan’s oil sales to reach 21.5mn tons: As mentioned above , commencement of summer season will improve FO sale of not just PSO but of the whole industry as power (electricity) demand start s to rise. Furthermore, with imminent economic recovery, demand starts to rise. Furthermore, with imminent economic recovery ,we believe demanded for HSD is also likely to pick pace. A for MS ,we believe the demanded will continue to grow as more and more consumers shift from CNGs to MS .This impetus shall allow FY14 OMCs sales to clock in at all time high to 21.5 mn tons.

AKD Quotidian about — Cotton update: April’14

Karachi, April 10, 2014 (PPI-OT): USDA released its monthly cotton report for Apr14 yesterday. In this regard, USDA’S production estimates for MY2OI 3/14 (MY: Marketing Year starting August 1st) came off by a meagre 60k bales while global consumption estimates were revised upwards by 240k bales.

Global Inventory estimates have been revised to 96.92mn tons up by 170k tons with the US headed for the Lowest cotton inventory leveI since 1990/91.

That said China is likely to continue to impact global cotton prices where China’s revised cotton policy may result in a slight decline In global cotton prices next year. Within this backdrop, AKD Securities continues to advise caution in spinning plays while manufacturers with concentration in higher value added segments are likely to – less impacted by the increase in cotton prices and PkR appreciation as their raw material costs are not necessarily fixed far the higher value added segments as opposed to raw material costs in the spinning segment.

In this regard, NML continues to be AKD Securities Limited’s top pick and offers an upside of 11% to AKD Securities Limited’s Jun14 TP of PkRI37.5 /share.

USDA Cotton report key takeaways: USDA released its monthly cotton report For Apr’14 yesterday in this regard. USDA’s production estimates for My 2013(My Marketing year starting August 1st ) came off by a meagre 60k bales .This was despite a sharp 320k bale cut in the US production estimates in line with market expectations .The cut in US production was offset by increased production estimated in other countries including Brazil.

On the demand front, consumption estimated were revised upwards by 240k bales led primarily by a 500k bale uptick in consumption estimate for Pakistan, where the additional demand is expected to be met by a similar increase in cotton imported by Pakistan.
Global inventory estimated have been revised to 96.92mn tons up by 170k tons. 1mn bale increase in Chinese ending inventory and a simultaneous decrease in US inventory estimates by 300k bales imply that the US is headed for the lowest cotton inventory level since 1990/91.

China’s new policy in a bid to improve sales from its cotton reserve ,China recently revised the price of cotton to be sold from the state reserve to CNY17,800 /ton (US$ 1.31/lb)and reportedly increased the requirement for cotton import quota by increasing it to 4 tons of cotton from the state reserve for every ton of cotton.

The requirement last year was 3 tons of cotton for every of import quota, while the move is expected to stymie import demand from China and hence bring down cotton prices, the switch to a direct cotton subsidy (limited initially to be Xinjiang province) may result in a decline in Chinese cotton production from other province s, bringing down total Chinese production.

This was mitigate the impact of lower import demanded by China due to increase auctions from the Chinese states reserve and provided some support to cotton prices .

The cotton reference price has been set by the Chinese Government at CNY19, 800/ton 9US$1.46/lb) with this backdrop, AKD Securities continues to advise caution in spinning plays while manufacturers with concentration in higher value added segments are likely to be less impacted b y the increase in cotton prices and pkr appreciation as their raw material costs are not necessarily fixed for the higher value added segments as opposed to raw material costs the spinning segment.

In this regard, NML continues to be AKD Securities Limited’s top pick and offers an upside of 11% to AKD Securities Limited’s Jun’14 TP of PKR 137.5/share.

AKD Quotidian about — Banks: 1QCY14 Result Previews

Karachi, April 09, 2014 (PPI-OT): The listed banking sector has gained 12.4%CYTD with valuation rerating in the ongoing macro uptick dovetailing with impetus to earnings following the recent shift into PIBs.

According to AKD Securities, some of these positives should manifest in upcoming 1QCY14 results where AKD Securities expects earnings growth to be led by higher NII (asset re-pricing) and continued strong fx income. Capital gains have the potential to add gloss to AKD Securities’ base-case 7%YoY earnings growth for AKD Universe Banks, with 1QCY14 results expected to lay the platform to what should turn out to be a strong growth year.

At current levels, AKD Securities flags catch-up themes as potential outperformers where preferred plays include BAFL (TP: PkR32/share) and NBP (TP: PkR60/share). Furthermore, while not among AKD Securities’ formal coverage cluster, FABL (deep discount to book value) and BAHL (potential inclusion in MSCI FM 100 Index) may also continue their price run-up.


EPS (PkR) 1QCY14F 1QCY13 YoY 4QCY13 QoQ DPS (PkR)
MCB 4.90 5.29 -7% 3.83 28% 3.00
ABL 2.62 2.49 5% 5.54 -53% 1.25
NBP 1.90 1.79 6% (0.91) n.m. -
HBL 4.15 3.42 21% 4.29 -3% 2.00
BAFL 0.90 0.75 20% 1.01 -10% -
UBL 4.16 3.82 9% 4.60 -10% 2.00

Universe result previews: As a group, AKD Securities expects the Big-6 banks to post combined NPAT of PkR24.9bn in 1QCY14F vs. combined NPAT of PkR23.3bn in 1QCY13, translating into modest growth of 7%YoY.

In this regard, AKD Securities expects upcoming 1QCY14 to lay the platform to what should turn out to be a strong growth year for banks particularly if the recent shift in favour of PIBs continues. Impetus to 1QCY14 results should broadly arise from higher NII as the impact of the 4QCY13 rate hikes (+100bps) builds into asset re-pricing.

At the same time, loan provisions are expected to stay benign while fee/fx income should turn in a strong performance. Positive surprises can emerge due to potential realization of capital gains, where already high backlogs will likely have been augmented by the KSE-100s 7.5% return in 1QCY14. Individually speaking, watch out for HBL and BAFL, each expected to post growth of 20%YoY. Furthermore, after a very poor showing in CY13, NBPs 1QCY14 result can potentially ease the bank’s asset quality concerns and thereby unlock price performance.

Investment perspective: The AKD Banking Universe has gained 13.4%CYTD to trade at a CY14F P/B of 1.4x and P/E of 9.6x. While valuation rerating is clearly underway, and makes us reiterate AKD Securities’ liking for the larger banks within the backdrop of sustainable macro improvement, AKD Securities likes catch-up themes in the near-term.

With names such as UBL and ABL rallying sharply of late, AKD Securities flags BAFL (TP: PkR32/share) and NBP (TP: PkR60/share) as scraps that can outperform in 2QCY14. Furthermore, while not among AKD Securities’ formal coverage cluster, FABL (deep discount to book value) and BAHL (potential inclusion in MSCI FM 100 Index) may also continue their price run-up.

AKD Quotidian about — Pakistan Market: Banks and OMCs on top!

Karachi, April 08, 2014 (PPI-OT): After touching its recent trough of 25.478.9 points. the Index has rallied by 3,100 points to close In at 28.578.9 level, translating into 12% return (20% En US$ terms during past 28 trading sessions.

According to AKD Securities, They believe this bull Run was majority supported by 1) Extraordinary foreign flows, primarily dictated by more than 100% increase In Pakistan weights in MSCI FM 100 Index in the upcoming Semi Annual l Review during the aforementioned period, market attracted foreign funds worth US$40.6mn). 2) Macroeconomic Improvement, which saw Pakistan’s forex reserves crossing The much coveted US$10bn mark3) Progress in peace talks with the TTP and 4) The GoP opting to be re –profile its debts, going into longer maturities highlighted by PKR974 bn raised through PIBs in 1QCY2014 against the target of PKR 180bn . with the latter vigour to the banking sector (-24% weight in the kSE-100 index)-the sector posited returns of 21% having 36% share in aforementioned growth witnessed by the KSE-100 index – this was followed by oil marketing Cos- (OMCs)which posed 33% returns and had 10 % contribution in the index .The laggards remained Chemical ,Power and Textile sectors , having cumulative weight of 22.6%.

Which sectors performed As mentioned above. banking sector led the line as far as contribution in index growth concerned : this was followed by10% contribution from OMCs despite having average weight of 4.15 % in the KSE -100 index. Similar was the performance another relatively low weight (6.4%) sector as consumer sector contribution was recorded at 8% while Cement sector had 6 % share with similar weight –E&Ps . on the other hand did have 12% contribution ,however, this looks a bit low keeping in mind that E&Ps have a weight 22.6% in the benchmark KSE-100 – AKD Securities believes this lethargic performance is down to poor showing by the sector ‘s heavy weight . OGDC ,Negatively impacted but swift acceleration of PKR vs US$ ,Refineries and Textiles remained worse performing sectors in the aforementioned rally.

Non –performers within the performing sectors : Banking sector remained the top performance in 3,100 points rally(+12%) that market has recently gone through. However with in banking sector ,there are certain stock that are yet to follow suit, these include NBP ( 8% return), and MEBL (5% return). Similar has been the tale for E&P sector ,where OGDC with 2% return remained laggard. As for cement sector ,MLCF,KOHC CHC and DGKC failed to chemical sector, both the Fauji have so far failed to catch up , with 7% return provided by the sector .

Investment perspective: Despite the recent rally ,sectors like E and P, power, Textile and chemicals are yet to pick up, it cumulative weight of roughly 46% in the KSE-100 , AKD Securities believes these will be sectors that will take the market to AKD Securities’ Jun-14 index target of 29,800 points ,In addition to these sectors , one cam also look into particular underperforming scraps within the sector one can also look into particular underperforming scraps with in the sector that has delivered staler performance in the above –mentioned rally. These scraps include NBP,FFBL,FFC,ENGRO,NML,KAPCO and OGDC among st others-