Annual Strategy: Pakistan Market Strategy 2025 Breaking Barriers: KSE-100 Marches Toward 148K – By Sherman Research
Dec 20 2024
Sherman Securities
- Pakistan’s KSE 100 index is all set to generate total return of 40%, breaching 148k level during CY25. Market is expected to reach target PE of 8x in line with last 10-year average PE versus current PE of 6.1x. Target PE of 8x is justified considering Pakistan’s economic outlook as most of the indicators are in line with average of last 10 years.
- After meeting all the key performance indicators specially during last 2 years (maintaining primary budget surplus, tight monetary policy, energy sector reforms and regulating FX market), Pakistan is now looking at raising tax to GDP which is expected to be key performance criterion for timely disbursement under new IMF Program of US$7bn.
- With inflation to remain below historical average and lower risk to external accounts during IMF Program, we expect policy rate to remain around 10% during next 2 years. Considering ample institutional liquidity, we expect diversion of Rs1.2-1.5trn funds (40% of the free float of KSE-100 Index) during CY25 from fixed income to equity market. Not only this, stable currency and cheap valuations will induce Foreigners’ interest in Pakistan market as they have been net sellers so far.
Annual Strategy: Market Strategy 2025 Inflation likely to remain in single digits for most of CY2025 – By Chase Research
Dec 20 2024
- Inflation expected to remain in single digits for most of CY2025.
- Central Bank to continue easing. We consider single digit interest rates a high possibility in 2025.
- Current Account should not present a challenge as improved remittances, recovering exports and administrative measures to keep balance in check.
- Pakistan Credit Ratings could improve in 2025 unlocking flows and strengthening PKR.
Tri-Pack Films Limited (TRIPF): 9MCY24 Corporate Briefing Takeaways – By Taurus Research
Dec 20 2024
Taurus Securities
- Tri-Pack Films Limited (TRIPF) is a subsidiary of Packages Limited which holds 69.3% of the Company. TRIPF produces Biaxially Oriented and Cast Polypropylene (BOPP & CPP) packaging films for food and beverage applications such as snacks, confectionery, dairy food, fresh cut vegetables, beverages etc., and non-food applications such as overwrapping, lamination, bag making etc. TRIPF has annual capacities of 78,000 tons for BOPP, 14,400 tons for CPP, and 32,600 tons for Metallizers.
- TRIPF boasts a product portfolio of 19 specialized films, these include: Low Sealing Temperature Film, Ultra Low Temperature Sealable Film, Tobacco Non-Coated Transparent Wrap, Anti-Fog Films, Perforated Film, Matt Film, In Mould Labels, Low Density Label Film, High Gloss Label Film, Broad Seal High Barrier, Ultra High Barrier Metallized Film, Heat Resistive BOPP Film, Cold Seal, BOPE, BOPP Super Barrier Film, CPP High Speed Lamination Film, Paper Bond Film, CPP Metallized Low Temperature Heat Sealable Film, and CPP Metallized High Barrier Film.
- As of 9MCY24, TRIPF’s revenue increased to PKR 21.8Bn compared to PKR 18.5Bn during the SPLY. Gross margin was recorded at 13% compared to 18% during the SPLY. The loss for the period was recorded at PKR 291Mn compared to a net profit of PKR 830Mn in the SPLY. The main reason cited for the loss during the year by the management was finance costs. Finance costs during 9MCY24 were recorded at PKR 1.7Bn compared to only PKR 700Mn in the SPLY. In addition to these, the gas tariff also increased by 110%.
Annual Strategy: Pakistan Market Strategy 2025 Breaking Barriers: KSE-100 Marches Toward 148K – By Sherman Research
Dec 20 2024
Sherman Securities
- Pakistan’s KSE 100 index is all set to generate total return of 40%, breaching 148k level during CY25. Market is expected to reach target PE of 8x in line with last 10-year average PE versus current PE of 6.1x. Target PE of 8x is justified considering Pakistan’s economic outlook as most of the indicators are in line with average of last 10 years.
- After meeting all the key performance indicators specially during last 2 years (maintaining primary budget surplus, tight monetary policy, energy sector reforms and regulating FX market), Pakistan is now looking at raising tax to GDP which is expected to be key performance criterion for timely disbursement under new IMF Program of US$7bn.
- With inflation to remain below historical average and lower risk to external accounts during IMF Program, we expect policy rate to remain around 10% during next 2 years. Considering ample institutional liquidity, we expect diversion of Rs1.2-1.5trn funds (40% of the free float of KSE-100 Index) during CY25 from fixed income to equity market. Not only this, stable currency and cheap valuations will induce Foreigners’ interest in Pakistan market as they have been net sellers so far.
Economy: Recent PSX rally led by local funds buying Thanks to the falling return on fixed income instruments – By Topline Research
Dec 20 2024
Topline Securities
- Pakistan Market since Sep 2024 to-date has returned 35% in both Rs and US$ terms, thanks to the strong net inflows of Rs58bn (US$207mn) of local mutual funds during the same period mainly due to conversion from fixed income to equities. In this note, we have tried to gauge the expected quantum of further liquidity market can receive due to conversion from fixed income to equities.
- The funds/investors are converting from Fixed income to equities as yields on fixed income instruments have fallen by 1253bps-1261bps from peak of 24.73% and 24.51% on 12M and 6M Treasury Bills in Sep 2023 to 12.20% and 11.9% on Dec 19, 2024.
- Equities will remain the preferred choice for investors: Unlike previous years where investors use to buy dollars, real estate, gold, prize bonds etc. for earning higher returns, we believe, in this cycle equities will get some portion of liquidity due to (1) higher restrictions on purchase of dollars, (2) increase in taxations, compliance and FBR valuation rates of properties, and (3) discontinuation of high denomination unregistered prize bonds.
Textiles: Increased imports vital for export growth – By JS Research
Dec 20 2024
JS Global Capital
- The United States Department of Agriculture (USDA) has raised cotton demand forecasts for India, Pakistan, and Vietnam, likely offsetting the projected decline in Chinese demand as Western importers continue diversifying their sourcing away from China and Bangladesh. Consequently, Pakistan's prospects for value-added exports, such as knitwear and ready-made garments, have improved, albeit at the expense of lower yarn exports to China.
- During 5MFY25, exports of knitwear, bedwear, and garments are up ~20% YoY while yarn exports are down 39%. On the other hand, Pakistan’s domestic cotton output is expected to fall to around 6-8mn bales (-36% to -17% YoY) due to 17% decline in cotton sowing area and lower crop yields.
- To meet the cotton requirement for the export demand, Pakistan is expected to import 5mn bales of raw cotton, costing ~US$2bn (at current avg import prices) compared to merely 1.2mn bales or US$0.45bn in FY24.
Morning News: Pakistan’s exports rise 9.06% in five months, imports edge up 1.06%: PBS – By WE Research
Dec 20 2024
- Exports from Pakistan increased by 9.06% in the first five months of FY2024-25, reaching Rs. 3,816,094 million, compared to Rs. 3,499,216 million in the same period last year. In November 2024, exports rose 7.17% year-on-year to Rs. 787,152 million. Key export commodities included knitwear, rice, readymade garments, and bedwear. Imports during July–November FY2024-25 totaled Rs. 6,248,611 million, a 1.06% increase from the previous year. November imports declined by 1.03% to Rs. 1,255,209 million. Key imports included petroleum products, LNG, palm oil, plastic materials, and mobile phones. Month-on-month, both exports and imports showed modest changes.
- Pakistan and China agreed to build an expressway linking Gwadar Port with the new Gwadar International Airport and initiate feasibility studies for new motorways, including the Mirpur-Muzaffarabad and Karachi-Hyderabad routes, under the China-Pakistan Economic Corridor (CPEC). The agreement was made during a meeting between Pakistan’s Federal Minister Ahsan Iqbal and China’s Vice Minister of Transport Li Ying in Beijing. Iqbal emphasized expediting major projects, including the KarachiHyderabad Section and ML-1 railway upgrade. He also proposed the Mashkhel-Panjgur Highway in Balochistan. Iqbal later met the President of the Export-Import Bank of China to discuss economic recovery and space projects. Both sides reaffirmed their commitment to strengthening the CPEC partnership for sustainable development and prosperity.
Technical Outlook: KSE-100; Testing the support range – By JS Research
Dec 20 2024
JS Global Capital
- The KSE-100 index witnessed another negative session, closing at 106,275, down 4,795 points DoD. Volumes stood at 1,167mn shares compared to 1,112mn shares traded in the previous session. The index is expected to test support at 105,937; a fall below this level will extend the decline towards 105,510, followed by 103,048. However, any upside will face resistance in the range of 107,980-110,040 levels. The Stochastic Oscillator and the RSI are heading down, supporting a corrective view. We recommend investors to stay cautious on the higher side and wait for dips. The support and resistance levels currently stand at 104,226 and 110,034, respectively.
Morning News: Pakistan, Türkiye Set Sights on $5 Billion Bilateral Trade Target – By Vector Research
Dec 20 2024
Vector Securities
- Prime Minister Mohammad Shehbaz Sharif held a bilateral meeting with the Turkish President Recep Tayyip Erdogan on the sidelines of 11th D-8 Summit in Cairo today
- The World Bank’s Board of Executive Directors is likely to approve “Sindh Flood Emergency Housing Reconstruction Project” worth $450 million on Friday (Dec 20), aimed at delivering beneficiary-driven, multi-hazard resilient reconstruction of core housing units affected by the 2022 floods in select districts of Sindh.
- Bangladesh’s interim leader Muhammad Yunus said Thursday he had “agreed to strengthen relations” with Pakistan, a move likely to further test his country’s frosty relations with India.
Morning News: Pakistan, Türkiye Set Sights on $5 Billion Bilateral Trade Target – By Darson Research
Dec 20 2024
Darson Securities
- Prime Minister Mohammad Shehbaz Sharif held a bilateral meeting with the Turkish President Recep Tayyip Erdogan on the sidelines of 11th D-8 Summit in Cairo today
- The World Bank’s Board of Executive Directors is likely to approve “Sindh Flood Emergency Housing Reconstruction Project” worth $450 million on Friday (Dec 20), aimed at delivering beneficiary-driven, multi-hazard resilient reconstruction of core housing units affected by the 2022 floods in select districts of Sindh.
- Bangladesh’s interim leader Muhammad Yunus said Thursday he had “agreed to strengthen relations” with Pakistan, a move likely to further test his country’s frosty relations with India.
Pakistan Petroleum Limited (PPL): Deriving value from improved cash positions –By Alpha - Akseer Research
Dec 19 2024
Alpha Capital
- We revise our stance to “Buy” on Pakistan Petroleum Limited (PPL) with our Dec-25 price target (PT) of PKR 278/sh, which projects a capital upside of 44% along with a dividend yield of 3.3%. The stock is currently trading at a discounted P/B of 0.7x along with a FY26 P/E of 5.6x against its historical 10-year average of 1.5x and 6.8x, respectively.
- Improved cashflow amid structural reforms: Under the IMF agreement, the Government of Pakistan implemented multiple price hikes to eradicate the longstanding issue of circular debt. Consequently, the gas system went from an OGRA estimated shortfall of PKR 171.2bn in FY24 to a projected surplus of PKR 78.9bn in FY25.
- Reko Diq – A tier-one asset ready to be realized: Reko Diq’s enormous copper and gold reserves yield a project NPV of USD 18.5bn, which may improve both PPL and Pakistan’s future prospects. Utilizing Barrick’s projections and timelines regarding the project, our base case for Reko Diq estimates a valuation impact around PKR 191bn (PKR71/sh) for PPL.
Annual Strategy: Pakistan Market Strategy 2025 Breaking Barriers: KSE-100 Marches Toward 148K – By Sherman Research
Dec 20 2024
Sherman Securities
- Pakistan’s KSE 100 index is all set to generate total return of 40%, breaching 148k level during CY25. Market is expected to reach target PE of 8x in line with last 10-year average PE versus current PE of 6.1x. Target PE of 8x is justified considering Pakistan’s economic outlook as most of the indicators are in line with average of last 10 years.
- After meeting all the key performance indicators specially during last 2 years (maintaining primary budget surplus, tight monetary policy, energy sector reforms and regulating FX market), Pakistan is now looking at raising tax to GDP which is expected to be key performance criterion for timely disbursement under new IMF Program of US$7bn.
- With inflation to remain below historical average and lower risk to external accounts during IMF Program, we expect policy rate to remain around 10% during next 2 years. Considering ample institutional liquidity, we expect diversion of Rs1.2-1.5trn funds (40% of the free float of KSE-100 Index) during CY25 from fixed income to equity market. Not only this, stable currency and cheap valuations will induce Foreigners’ interest in Pakistan market as they have been net sellers so far.
Pakistan Economy: SBP Slashes Policy Rate by 200bps – By Sherman Research
Dec 16 2024
Sherman Securities
- The State Bank of Pakistan (SBP) slashed the policy rate by further 200bps to 13%, in-line with our forecast. This is the 5 th consecutive time, SBP has reduced the policy rate since the initial cut in the June’24 Monetary Policy Committee (MPC) meeting, bringing the cumulative rate cuts to 900 bps.
- The SBP’s decision to reduce rates by 200bps is primarily driven by a rapid decline in inflation which is approaching the medium-term average inflation target of 5-7%.
- Additionally, the SBP attributed this decline in inflation to the following factors: 1) a significant decline in food inflation, 2) favorable global oil prices, and 3) absence of adjustments in gas tariffs and PDL rates
Economy: November CPI Clocked in at 4.9%YoY – By Sherman Research
Dec 2 2024
Sherman Securities
- CPI for Nov’24 was recorded at 4.9% YoY, inline with our expectations. This marks the lowest CPI level since April’18. On a MoM basis, inflation increased by 0.5%MoM, primarily driven by the housing index. Additionally, average CPI for the first five 5MFY25 stood at 7.94%.
- The food index decreased by -0.2%MoM in November primarily due to decline in prices of chicken (down 16.9%), Pulse (down 7.4%), fresh vegetables (down 7.2%), and fresh fruits (down 6.7%).
- The housing index increased marginally by 0.4% MoM, attributed to higher LNG prices, water supply charges, and construction wages. However, electricity rates declined (down 0.22%MoM) during the period.
Fertilizer: Urea Sales up 82%MoM, DAP Sales down 23%MoM – By Sherman Research
Dec 2 2024
Sherman Securities
- According to provisional data, urea sales during Nov’24 is expected to clock in at 652k tons (8-month high), up 82%MoM. Meanwhile DAP sales to decline by 23%MoM. The surge in urea sales is mainly due to higher demand owing to seasonal impact.
- Urea sales of Fauji Group to clock in at 283k tons versus sales of 179k tons during previous month, up by 58%MoM. Moreover, EFERT is likely to witness sharp increase in urea sales by 91%MoM (low base impact) to 191k tons as compared to 100k tons during previous month. Surprisingly, FATIMA group to post sharp growth of 2.1xMoM.
- Overall, closing urea inventory is estimated to be around 789k tons with EFERT FATIMA Group and Agritech contributing 348k, 209k and 79k tons, respectively. Despite the higher sales, gradual piling of inventory is due to better production during the period.
BF Biosciences (BFBIO): Analyst Briefing Takeaways – By Sherman Research
Nov 28 2024
Sherman Securities
- BF Biosciences (BFBIO) conducted analyst briefing session today, wherein the management discussed financial results and future outlook of the company.
- The company reported a 44% growth in net revenue for 1QFY25, driven primarily by a 39% increase in volume, with the remainder attributed to price hikes. ICON was the largest contributor to revenue, followed by RIFAXA, ERTITREGEN, and VORIF.
- Updating on Line 2 , the management conveyed that production dedicated to pre-filled syringes, has commenced. Depreciation for this new line will be recognized starting next quarter. Meanwhile, the combination and lyophilization lines are in the validation phase.
Unity Foods Limited (UNITY): Analyst Briefing Takeaways– By Sherman Research
Nov 25 2024
Sherman Securities
- Unity Foods Limited (UNITY) conducted its corporate briefing today where in management discussed FY24 financial result and future outlook.
- In FY24, the company reported (Unconsolidated) net loss of Rs2.5bn (LPS of Rs 2.1), compared to a net profit of Rs567mn (EPS of Rs 0.5) in the same period last year. The decline in earnings was primarily driven by a significant 105% increase in finance costs and higher operating expenses.
- Operating expenses, as a percentage of sales, rose from 2% in FY23 to 3% in FY24, mainly due to inflationary pressures, the expansion of income streams, and increased costs associated with exports.
AGHA Steel Ltd (AGHA): Analyst Briefing Takeaways – By Sherman Research
Nov 25 2024
Sherman Securities
- AGHA Steel Ltd conducted its corporate briefing today, discussing the financial results for FY24 and 1QFY25, along with the company's outlook.
- The management highlighted that steel demand remains low, primarily due to subdued construction activity. This slowdown is attributed to certain tax policies implemented by the government.
- The management expressed the view that a reduction in policy rates alone will not be sufficient to stimulate construction activity or boost steel demand under the current circumstances.
Ghandhara Automobiles Ltd. (GAL): Analyst Briefing Takeaways – By Sherman Research
Nov 22 2024
Sherman Securities
- Ghandhara Automobiles Limited (GAL) conducted its corporate briefing today, during which the management discussed FY24 and 1QFY25 financial results, along with future outlook.
- The management informed that the company is in the process of launching the Cherry Cross PHEV model in January or February 2025. The delay is attributed to technical and testing issues faced by the Chinese partner, Cherry International.
- To recall, during the AGM, the management had announced plans to launch the Cherry Tiggo 4 as a PHEV mode.
BF Biosciences (BFBIO): Downgraded to ‘Hold’ – By Sherman Research
Nov 18 2024
Sherman Securities
- BF Biosciences launched its IPO on September 25, 2024, with a floor price of Rs55/share. Thanks to an overwhelming response from investors, the IPO was oversubscribed by 3.4x, closing at a strike price of Rs77/share. We initiated coverage with a ‘Buy' recommendation on its IPO (please refer our report titled ‘BF Biosciences IPO - New Diabetes Business, a game changer: Subscribe’)
- Since its listing on October 21, BFBIO has delivered an impressive 60% return, significantly outperforming the pharmaceutical sector’s 28% gain in the same period. Thus, due to sharp rally, we are downgrading our stance to ‘Hold’. BFBIO is trading at FY25 PE of 18x
- BF Biosciences has been a leader in life-saving drug production from its advanced facility in Lahore, focusing on treatments for cancer, hepatitis C, and other critical conditions.