Pakistan Market: Energy Chain Successive gas prices turns GDS positive - By Insight Research

Jan 29 2025


Insight Securities


  • The energy sector has witnessed notable improvements over the past couple of years, primarily driven by the rationalization of energy tariffs. As per Government minister, cost of natural gas has been increased by ~70% since PDM government. Additionally, the introduction of fixed charges for domestic consumers has further contributed to reducing the revenue shortfall for Sui companies. Moreover, favorable international oil and RLNG prices, along with the inclusion of RLNG diversion costs in tariff determinations, have further bolstered the cash flow of the entire value chain. Notably, the recovery ratios of OGDC, PPL, and PSO improved from 28%, 23%, and 95% in the FY23 to 113%, 104%, and 101% in Sep’24, respectively.
  • Recently, Government has hiked the gas prices for Captive power plant (CPP) bringing it at par with RLNG to PKR3,500/mmbtu. As per IMF agreement, government has committed to ending the gas supply to captive power plants by the end of Jan’25 (an IMF structural benchmark) and transitioning these operations to the national electricity grid to boost grid demand. However, as per news flow, IMF has shown flexibility on increasing CPP gas prices inline with RLNG. To highlight, ECC also instructed Petroleum Division to implement a grid transition levy on captive power plants. This development would positively impact companies involved in the gas circular debt, such as OGDC, PPL, and PSO, as it would enable Sui companies to retain higher-paying customers and address additional gas offtake issues.
  • However, Government has not increased the gas prices for any other consumer indicating sufficient surplus due to higher avg consumer end prices compared to prescribed price. Below, we have calculated the additional revenue, referred to as the Gas Development Surcharge (GDS), which represents the difference between the prescribed price and the consumer-end price. In the tariff determination, government has allocated PKR100bn to cover the cumulative revenue shortfall of Sui companies from the previous year. So by excluding previous year shortfall, we arrived at a positive GDS of PKR156bn. As per our understanding, positive GDS is likely to utilize in settling previous year shortfall which has resulted in circular debt for State-owned companies.

A PHP Error was encountered

Severity: Notice

Message: Undefined variable: share_research

Filename: views/single.php

Line Number: 74

Backtrace:

File: /var/www/html/application/modules/Research/views/single.php
Line: 74
Function: _error_handler

File: /var/www/html/application/third_party/MX/Loader.php
Line: 351
Function: include

File: /var/www/html/application/third_party/MX/Loader.php
Line: 294
Function: _ci_load

File: /var/www/html/application/modules/Research/controllers/Research.php
Line: 135
Function: view

File: /var/www/html/index.php
Line: 294
Function: require_once

A PHP Error was encountered

Severity: Warning

Message: Invalid argument supplied for foreach()

Filename: views/single.php

Line Number: 74

Backtrace:

File: /var/www/html/application/modules/Research/views/single.php
Line: 74
Function: _error_handler

File: /var/www/html/application/third_party/MX/Loader.php
Line: 351
Function: include

File: /var/www/html/application/third_party/MX/Loader.php
Line: 294
Function: _ci_load

File: /var/www/html/application/modules/Research/controllers/Research.php
Line: 135
Function: view

File: /var/www/html/index.php
Line: 294
Function: require_once

Pakistan Economy: Feb’25 LSMI down 5.9%MoM/down 3.5%YoY - By Taurus Research

Apr 16 2025


Taurus Securities


  • Large Scale Manufacturing Index (LSMI) down 5.9%MoM in Feb’25, due to decline from key sectors i.e. Furniture (-56%), Machinery & Equipment (-34%) and Chemical Products (-19%). Whereas, top contributors were Other Transport Equipment (38%), Automobiles (31%), Coke & Petroleum Products (23%) and Tobacco (18%), respectively. 8MFY25 LSMI was down 1.9%YoY.
  • Textile production declined by ~0.33%YoY in Feb’25 attributable to decline in production of jute goods, woolen & worsted cloth and woolen blankets by 36.65%YoY, 3.66%YoY and 94.76%YoY, respectively— mainly due to the lower domestic and international demand driven by a seasonal shift that reduced the overall requirement of these products. Whereas, on a monthly basis it significantly declined by ~3.24%MoM, mainly due to the decline in production of jute goods, terry & towels, woolen & carpet yarn and woolen blankets by 19.56%MoM, 7.34%MoM, 4.42%MoM and 94.21%MoM, respectively
  • Automobile production down ~5%MoM in Feb’25. Wherein, Jeeps & cars production declined by 10%MoM. Similarly, LCVs production down ~13%MoM, respectively. On a YoY basis, production of LCVs, Jeeps & Cars, Trucks and Buses went up by ~23%, 26%, 1.8x and 48% on the back of controlled manufacturing costs, stable tariffs, eased import restrictions on CKD units and recovering demand due to improving macros.
Lotte Chemical Pakistan Limited (LOTCHEM): Earnings Hold Steady as PTA Margins Remain Underwhelming - By IIS Research

Apr 16 2025


Ismail Iqbal Securities


  • We expect LOTCHEM to report a PAT of PKR 779 million (EPS: PKR 0.51) for 1QCY25, compared to LPS 0.01 in last quarter. This improvement comes as operations normalize following a one-month plant turnaround last quarter. PTA sales volumes are also anticipated to recover to typical levels. However, PTAPX margins have averaged USD 100/ton this quarter, lower than the USD 122/ton in the past six years and the long term average of USD 110/ton, largely due to global dynamics and subdued international demand.
  • Additionally, this quarter is affected by the recent gas price hike. Where, the gas price for captive power plants has increased to Rs 3,500 per MMBtu, effective February 1, 2025. While this increase poses some pressure, it's worth noting that LOTCHEM’s cost structure and margins are largely driven by international PTA-PX spreads. Notably, in CY24, only around 7% of COGS was from oil, gas, and electricity expenses. Furthermore, the company is in the process of being acquired, as AsiaPak Investments Limited and Montage Oil DMCC entered into a share purchase agreement to acquire a 75.01% stake in LOTCHEM.
Bank Al-Falah Limited (BAFL): 1QCY25 EPS to clock-in at PKR 3.3; PAT down 47%YoY/up 13%QoQ - By Taurus Research

Apr 16 2025


Taurus Securities


  • Board Meeting: Thursday, April 17, 2025
  • 1QCY25 EPS: PKR 3.3. 1QCY25 PAT down 47%YoY. BAFL is also expected to announce a cash dividend of PKR 2.0/sh.
  • Net Interest Income (NII): We anticipate net interest income to post a drop of 9%YoY/11%QoQ mainly on account of falling yields on investments and re-pricing of the loan book; partially offset by a lower cost of funds due to the rate cut in Jan’25 and the impact of revised MDR regime coming into effect Jan’25 onwards
Commercial Bank: Banking Sector’s Dividends Payouts to Persist Despite Earnings Attrition in 1QCY25 - By Pearl Research

Apr 16 2025


Pearl Securities


  • We preview 1QCY25 earnings result for commercial banks within our coverage. We expect earnings of the Pearl banking universe to witness erosion of 3.6% QoQ due to NIM compression coupled with tapering off of growth in non-core income.
  • Notably, we expect the lagged impact of asset repricing and declining asset yields amid aggressive monetary easing measures to serve as a headwind for interest income, which nonetheless should partly be counteracted by volumetric balance sheet growth.
  • Additionally, we anticipate the offsetting decline in cost of deposit to remain relatively muted compared to the previous quarter despite strategic shift into low-cost deposits by the sector, thereby resulting in core income witnessing a contraction of ~6% QoQ, according to our estimates
Technical Outlook: KSE-100; Consolidation likely above key averages - By JS Research

Apr 16 2025


JS Global Capital


  • The KSE-100 index extended the gain to close at 116,776, up 385 points DoD. Volumes stood at 479mn shares compared to 485mn shares traded in the previous session. The index is expected to revisit yesterday’s high of 117,362 where a break above targeting 118,718 level. However, any downside will find support at the 30-DMA which is currently at 115,631. The RSI and the Stochastic Oscillator have moved up, supporting a positive view. We recommend investors to ‘Buy on dips’, with risk defined below the 30-DMA. The support and resistance levels are at 116,493 and 117,210 levels, respectively.
Engro Powergen Qadirpur Limited (EPQL): 1QCY25 EPS arrive at PKR 1.19, up 1.5xQoQ - By Taurus Research

Apr 15 2025


Taurus Securities


  • 1QCY25 EPS: PKR 1.19; DPS: PKR 7.5.
  • Revenue increased 9%QoQ to PKR 3.1Bn, attributed to improved dispatches amid seasonal demand recovery. However, YoY growth remained flat due to the impact of revised PPA terms, which converted the plant's structure to a 'take-and-pay' regime, limiting guaranteed capacity payments.
  • Finance income stood at PKR 26Mn versus PKR 238Mn in 1QCY24 (SPLY), reflecting the absence of late payment surcharge (LPS) which previously contributed significantly. The decline was anticipated after the company received PKR 8.04Bn in overdue receivables under the revised PPA settlements.
Commercial Banks: 1QCY25 Result Preview: Payouts to remain intact - By AKD Research

Apr 15 2025


AKD Securities


  • AKD Banking Universe is set to announce its 1QCY25E results, where we expect profitability to decline by 12%QoQ, as contraction in NIMs and a drop in nonmarkup income are expected to outweigh the impact of lower operating expenses and reduced taxation.
  • We anticipate our banking universe to maintain dividends in the first quarter, supported by resilient capitalization amid monetary easing, recovery in macro economic variables and removal of mandated ADR based taxation during the previous quarter.
  • Profitability to take a hit from declining yields: AKD Banking Universe is set to announce its 1QCY25E results, where we expect profitability to decline by 12%QoQ to PkR75.1bn, as contraction in NIMs and a drop in non-markup income are expected to outweigh the impact of lower operating expenses and reduced taxation.
United Bank Limited (UBL): 1QCY25 EPS to clock-in at PKR 18.4; PAT up 43%YoY/down 12%QoQ - By Taurus Research

Apr 15 2025


Taurus Securities


  • Board Meeting: Wednesday, April 16, 2025
  • 1QCY25 EPS: PKR 18.4. 1QCY25 PAT up 43%YoY. UBL is also expected to announce an interim cash dividend of PKR 12/sh.
  • Net Interest Income (NII): Expected to go up 2xYoY/9%QoQ, driven by robust growth in current accounts and a lower cost of funds as changes to the MDR regime go into effect, along with a drop in leverage on a sequential basis – offsetting the pressure on yields, specially on the Bank’s investment portfolio.
Technical Outlook: KSE-100: Closed above 30-DMA - By JS Research

Apr 15 2025


JS Global Capital


  • The KSE-100 index posted a gain of 1,537 points to close at 116,390. Volumes stood at 485mn shares compared to 459mn shares traded in the previous session. The index has closed above the 30-DMA which will now provide support at 115,535, followed by 114,357 (50-DMA). However, any upside will face resistance in the range of 116,500-117,300 where a break above targeting 118,718 level. The RSI and the Stochastic Oscillator have improved, supporting a positive view. We recommend investors to ‘Buy on dips’, keeping stoploss below the 30-DMA. The support and resistance levels are at 115,593 and 116,840 levels, respectively.
Morning News: IMF concludes Pak visit, set to propose transparency reforms - By Vector Research

Apr 15 2025


Vector Securities


  • The International Monetary Fund (IMF) has identified key shortcomings in Pakistan's governance, including the politicisation of the civil service, weak organisational accountability, and excessive focus on short-term goals. These issues, the IMF noted, contribute to broader governance weaknesses and increase vulnerability to corruption. The report which is expected to be made public by August this year will give recommendations for ensuring greater transparency and improving the public sector delivery by minimising the chances of corruption and through merit-based decisions.
  • With the halt of USAID operations by President Donald Trump, Pakistan’s total portfolio of $445 million has been affected over five years, surfacing a gap of $40 million for the current fiscal year for on-budget development projects. “However, in a positive development on the external front, Fitch Ratings might upgrade Pakistan’s rating within a few days”, top official sources confirmed while talking to The News on Monday. The Fitch might upgrade from a notch of CCC+ to BBB keeping in view the reduced risk of default.
  • Members of the delegation of US congressmen visiting Pakistan have described their trip to the South Asian country as "extremely productive" and “significant for the future", which is good news for the mineral-rich country. The delegation also attended the Pakistan Mineral Investment Forum 25 (PMIF25) last week in Islamabad.
Pakistan Fertilizer: 1QCY25 Preview: Lower offtakes to dent profitability - By Insight Research

Apr 10 2025


Insight Securities


  • As per NFDC, urea offtakes decreased by 38% YoY to clock in at 1.13mn tons in 1QCY25, from 1.82mn tons in SPLY. Similarly, DAP offtakes decreased by 52% YoY to reach at 143kt, compared to 299kt in SPLY. This decrease is primarily attributable to weak farm economics. Due to steep decline in offtakes, we estimate EFERT/FFC/FATIMA to post EPS of PKR2.0/9.1/3.3 in 1QCY25, respectively.
  • FFC is expected to post unconsolidated PAT of PKR12.9bn (EPS: PKR9.1) in 1QCY25, reflecting a decline of ~13%/9% YoY/QoQ, primarily driven by lower offtakes. In 1QCY25, FFC's urea offtakes decrease by 34%/36% YoY/QoQ to reach at 537kt, compared to 819kt in the SPLY and 839kt in previous quarter. Similarly, DAP offtakes decreased by 52%/77% YoY/QoQ. FFC's revenue is expected to clock in at PKR60.8bn, down from PKR104.9bn in SPLY. Gross margins are expected to increase by ~11ppts YoY, amid increase in product prices. Similarly on QoQ basis, gross margins improved by ~10ppts due to a one-off adjustment in the previous quarter following the FFBL merger. Additionally, company’s finance cost is anticipated to decrease by 35% YoY, primarily due to decline in interest rates. Other income is expected to witness a decrease of ~46% YoY, amid lower dividend income and interest rates. Whereas same is expected to increase by ~14% QoQ due to dividend income in the quarter and increase in cash & cash equivalent. Along with the result, we expect company to announce a cash dividend of PKR7.3/sh.
Pakistan Economy: Power tariff got slashed - By Insight Research

Apr 4 2025


Insight Securities


  • In a recent development, Prime Minister has announced a reduction in electricity tariffs by PKR7.41/unit for residential consumers and PKR7.59/unit for industrial users. This long-awaited relief had been widely anticipated in recent months, as rising administered energy prices were significantly eroding consumer purchasing power and were negatively impacting the overall economic activity. According to government sources, the IMF has endorsed this plan.
  • To address the issue, the government initiated measures such as revising/terminating contracts with IPPs and increasing the rate of PDL on petroleum products by PKR10/ltr last month, to finance tariff differential subsidy.
  • The primary contributors to the PKR7/unit tariff reduction includes termination of Power Purchase Agreements with certain IPPs along with renegotiation regarding hybrid take and pay model with others. Furthermore, the government plans to utilize the incremental revenue from the recent PKR10/ltr hike in PDL to fund Tariff Differential Subsidy. Moreover, Quarterly Tariff Adjustment of ~PKR1.9/unit, effective from Apr’25, along with expected fuel cost adjustments, will further support the government in implementing the announced relief of ~PKR7/unit.
Economy: Mar’25 CPI likely to clock in at 0.65% - By Insight Research

Mar 27 2025


Insight Securities


  • Headline inflation is set to fall below 1% mark in Mar’25 and is estimated to clock in at ~0.65%. The decline in CPI is mainly driven by lower food prices and is further aided by decline in housing and transport index. On MoM basis, inflation is likely to inch up by 0.8%, amid higher food prices due to Ramzan seasonality. While housing and transport index is likely to decline MoM amid negative FCA in electricity charges and lower motor fuel prices, respectively. This will take 9MFY25 inflation to ~5.4% compared to ~27.2% in SPLY.
  • Within the SPI basket, items that recorded significant increase in prices during the period are as follows, Tomatoes (42.5↑%), Fresh fruits (41.1↑%), Chicken (15.0%↑), Eggs (14.7%↑) & Sugar (11.4%↑). On the flip side, prices of the following items eased off during the month, Onions (20.7%↓), Tea (11.8%↓), Fresh vegetables (8.9%↓), Potatoes (7.3%↓) & Pulse gram (6.7%↓).
MCB Bank Limited (MCB): Defensive play with steady gains - By Insight Research

Mar 17 2025


Insight Securities


  • MCB boasts one of the highest current account mixes in the banking sector. MCB presents a compelling investment case due to its attractive dividend yield and stable strategic approach. The bank has been focusing on building a low-cost deposit base and with interest rates dropping sharply in the last few quarters resulting in narrowing NIMs and the removal of ADR-based taxation, the bank is now more focused on increasing zero-cost deposits in its mix.
  • We maintain our BUY stance on MCB, with a DDM & P/BV based target price of PKR345/sh for Dec’25. The stock is currently trading at a P/E & P/B of 6.9x & 1.3x on CY25 estimates, with a DY of ~13%
  • Key risk to our investment thesis are i) Lower than estimated growth in current accounts, ii) Deterioration in asset quality, iii) Higher than estimated operating expenses and iv) Abrupt changes in regulatory framework.
Indus Motor Company Limited (INDU): Analyst briefing takeaways - By insight Research

Mar 13 2025


Insight Securities


  • Indus Motor Company Limited (INDU) has conducted its corporate briefing to discuss financial results of the company. We have highlighted key takeaways from the briefing.
  • INDU posted a PAT of PKR9.96bn in 1HFY25 compared to PAT of PKR4.96bn in SPLY. The increase in profitability is driven by higher volumetric sales and healthy gross margins.
  • Management stated that improvement in gross margins is attributable to stable exchange rate, reduced fixed cost, higher localization level and efficient energy mix. To highlight, solar constitutes ~25% of total energy requirement.
Pakistan Petroleum (PPL): Solid foundations - By Insight Research

Mar 11 2025


Insight Securities


  • We reiterate our ‘BUY’ stance on PPL with reserves based Dec’25 target price of PKR280/sh, implying 54% potential upside. With the consecutive increase in gas prices for past four semi-annual revisions, cashflow situation has improved significantly in state owned oil & gas companies where PPL’s cash collection ratio improved to ~100% in 1HFY25 vs. 73% in SPLY. As per 1HFY25 accounts, company’s CFO reached to PKR48.6bn vs. PKR32.1bn in SPLY, attributable to higher recovery from Sui companies.
  • The company's cash flow is expected to remain robust going forward due to higher recoveries from Sui companies. Additionally, IMF program will ensure that the Government will continue to pass on cost pressure to consumer. This will ease the company’s liquidity constraints, enabling it to expand exploration activities, focus on growth-related projects, and provide higher payouts.
  • The Government has taken steps to enhance the viability of the sector and reduce reliance on imports by increasing local production. Any progress in resolving the gas circular debt pileup would be highly beneficial for PPL, as company holds overdue trade debts of PKR544bn (PKR200/sh) from SOEs, as per Dec’24 accounts. Furthermore, Barrick Gold’s feasibility study for Reko Diq highlights a compelling 22% dollarized IRR, reinforcing its potential as a significant value driver for the company. Based on our initial estimates, Reko Diq is projected to contribute PKR87/sh to PPL’s valuation, positioning it as a key catalyst for long-term growth.
Meezan Bank Limited (MEBL): Analyst briefing takeaways -By Insight Research

Feb 26 2025


Insight Securities


  • Meezan Bank Limited has conducted its conference call today to discuss bank’s financial performance and outlook. Key takeaways of the analyst call are as follows:
  • Bank’s deposit has grown at CAGR of ~34% between 2002-2024, compared to industry’s average of 8.5%.
  • During the year, bank opened 47 new branches taking total branches to 1,098
Nishat Chunian Limited (NCL): 2QFY24 EPS clocked in at PKR0.96 – Below expectation - By Insight Research

Feb 26 2025


Insight Securities


  • NCL has announced its 2QFY25 result, wherein the company has posted consolidated PAT of PKR231mn (EPS: PKR0.96) vs. LAT of PKR911mn (LPS: PKR3.8) in SPLY. The result is below our expectation due to higherthan-expected tax expense.
  • In 2QFY25, company’s revenue clocked in at PKR20.7bn (US$74.2mn) compared to PKR20.1bn (US$71.0mn) in SPLY, up by ~3% YoY. The increase in topline is possibly attributable to higher volumetric sales. However, same is down by ~11% on QoQ basis.
  • Gross margins clocked in at ~11% depicting an increase of ~2.3ppts QoQ, possibly due to operational efficiency and lower cotton prices.
Fauji Cement Company Limited (FCCL): 2QFY25 EPS clocked in at PKR1.6 – Above expectation - By Insight Research

Feb 25 2025


Insight Securities


  • FCCL has announced its 2QFY25 result, wherein company has posted PAT of PKR4.0bn (EPS: PKR1.6) vs. PAT of PKR2.7bn (EPS: PKR1.1) in SPLY. The result is above our expectation due to higher-than-expected gross margins.
  • In 2QFY25, revenue increased by 24%/8% YoY/QoQ mainly due to higher volumetric sales and better retention prices. To note, company’s local cement offtakes increased by 17%/14% YoY/QoQ.
  • Gross margins of the company clocked in at 35.8%, up by 314bps/142bps YoY/QoQ, possibly due to optimal energy mix and decline in coal prices.
Gul Ahmed Textile Mills Limited (GATM): 2QFY24 EPS clocked in at PKR0.93 – Above expectation - By Insight Research

Feb 25 2025


Insight Securities


  • GATM has announced its 2QFY25 result, wherein the company has posted consolidated PAT of PKR687mn (EPS: PKR0.93) vs. PKR547mn (EPS: PKR0.74) in SPLY, up by 26% YoY. The result is above our expectation due to higher-than-expected gross margin and lower tax expense.
  • In 2QFY25, company’s revenue clocked in at PKR45.68bn compared to PKR41.23bn in SPLY, up by ~11 YoY. The increase in topline is possibly attributable to higher volumetric sales.
  • In dollar terms, company’s revenue clocked in at US$164.0mn in 2QFY25 vs. US$145.5mn in SPLY, up by ~13 YoY. However, same is down by ~7 QoQ.