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Dawood Hercules - MM Securities Report

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COMPANY ANALYSIS REPORT
                                                                               Fertilizer Sector

                 BUY                               Dawood Hercules Chemicals Limited

Current Price:           PKR 37.00/share                                     Dated: December 14, 2011
Target Price:            PKR 55.00/share
                                                Highlights
Upside Potential:        48%                    Our recommendation is to BUY the stock as the script
                                                offers 48 % upside potential. The target price of PKR
                                                55.00 per share has been calculated through FCFE
Symbol:                                         Model.
Bloomberg                DAWH: PA
                                                  GLOBAL DEMAND-SUPPLY GAP WILL
KSE                      DAWH
                                                   BRIDGE:
                                                   According to IFA Agriculture Committee forecasts as
Key data:                                          of May 2011, Global fertilizer demand is expected to
                                                   grow at an average annual rate of 2.4% between 2010
Closing Price (PKR)      39.98
                                                   and 2015. Demand for Urea is expected to increase
12m High-Low (PKR) 76.56 – 34.86                   by 3.2% per annum i.e. 148MT to 171.7MT by 2015.
12m Avg. Price (PKR) 31.04
Shares (mn)              481.287                  LOCAL UREA PRODUCTION FALLS:
                                                   Gas curtailment has hampered the domestic industry’s
Market Cap (PKR mn) 19,241.86                      production. Domestic production of Urea was 4.26mn
Free Float (mm)          254.667                   tons in 10MCY10 which fell to 4.08mn tons in
EPS-CY11P                9.44                      10MCY11, registering a decline of 4.21%, despite the
                                                   addition of 1.3mn tons of capacity this fiscal year.
EPS-CY12P                12.52
DPS-CY11P                1.42                     FERTILZER SECTOR PERFROMS BETTER ON
DPS-CY12P                1.88                      KSE-100:
                                                   Fertilizer Sector in Pakistan has been performing on
P/E-CY11P                 3.97x
                                                   the better side as compared to KSE-100 index mainly
                                                   due to the continuous increase for fertilizer demand in
                                                   the market and still provides support to GDP by 22%
                                                   per annum.

                                                  FORMATION OF DH-FERTILIZER:
                                                   DH-Fertilizer Limited was incorporated on August 02,
                                                   2010. In this connection company filed a petition in
                                                   Lahore High Court on June 17, 2010 for demerger
                                                   which was approved on 27 January, 2011. Now
                                                   Dawood Hercules Chemicals Limited has become a
                                                   Holding Company.

Ijaz-ur-Rehman
ijaz@mmsecurities.com.pk
Tel: +92 21 35317703 – 4 (114)

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Company Overview
Dawood Hercules Chemicals Limited is engaged in the production purchase and sale of fertilizers such as
Urea and DAP. It was incorporated as a public limited company in April 1968 as a venture between
Dawood Group of Industries and Hercules Inc. USA.

Recently, the board of directors, Dawood Hercules Chemicals Limited, approved the demerger of its
fertilizers undertaking and its transfer to a wholly owned subsidiary, which was incorporated on August
02, 2010. In this connection they filed a petition in Lahore High Court on June 17, 2010 for the demerger
which was approved on 27 January, 2011. Now Dawood Hercules Chemicals Limited has become a
Holding Company.

Dawood Hercules Chemicals Limited has also made long-term equity investment in ENGRO Corporation
Limited (38.14% share) to enhance DAWH shareholder value by diversification, through equity
participation in a well establish business with good growth prospects.

Global Outlook – Demand & Supply
Fertilizer

The global fertilizer sector witnessed growth after the low levels faced post 2008.According to IFA
Agriculture Committee forecasts as of May 2011; global fertilizer demand is expected to grow at an
average annual rate of 2.4% between 2010 and 2015. World consumption of fertilizer is projected around
190MT nutrients by 2015. This upside potential exceeds the historical past trend, which was 2.2% per
annum. A total of 58 new plants are planned to come online between 2010 and 2015, of which 41 will be
located outside China. This would increase world Urea capacity by 45MT to 224.5MT by 2015. South
Asia will contribute 26% of the net increase in capacity, followed by East Asia, Africa, West Asia, Latin
America, EECA and Oceania, on regional basis. In contrast with the historical trend and the upcoming new
projects, world Urea supply is estimated to increase up to 155.6MT by 2011 and 190.5MT by 2015.
Demand for Urea is expected to increase by 3.2% per annum i.e. 148MT to 171.7MT by 2015. In 2011,
world Urea market experienced a relatively tight balance followed by a large increase in supply leading to
a potential surplus of 18MT by 2015.

                                           World Urea Supply/ Demand Balance
                                                       (Mn MT)
Supply                       2011              2012           2013             2014            2015

Capacity                     184.1             198.2          205.4            218.6           224.5
Total Supply                 155.6             165.1          171.7            182.1           190.5
Demand
Fertilizer Demand            134.5             138.6          142.6            146.4           150.4
Non F. Demand                 18.7              19.6          20.2              21.0            21.3
Total Demand                 153.2             158.2          162.8            167.4           171.7
Potential Balance             2.40              6.90          8.90             14.70           18.80
% of Supply                   1.5               4.2            5.2              8.1             9.9




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DAP

As per IFA forecast, 40 new MAP, DAP and TSP units are planned to come online in eleven countries
over the next five years. Africa (Algeria, Morocco and Tunisia), Middle East (Saudi Arabia), Asia
(Bangladesh, China, Indonesia and Viet Nam), Latin America (Brazil and Venezuela) and ECCA
(Kazakhstan) are included in these eleven countries. In this connection, global capacity for the phosphate
fertilizer is projected to be 44.4MT by 2015. The global DAP supply/demand balance shows relatively
tight market conditions from 2011 to 2013, with a potential surplus of less than 1MT DAP over this period.
By 2014, the potential surplus may expand to 1.3MT.

Urea & DAP in Pakistan
Demand for Urea in Pakistan has increased by 3.1% YoY to 4,760mn tons as of 10MCY11 from 4,618mn
tons as of 10MCY10.In contrast, off take of DAP was 790mn tons in 10MCY11 as compared to 960mn
tons in the same period last year, showing a decrease of 17.7%YoY, due to decrease in DAP margins. It is
expected that it will bounce back to 2009 level of about 6.5mn tons. The factors that contributed towards
the depression in 2010 included unprecedented rains followed by floods and the emergence of Cotton Leaf
Curl Virus (CLCV) in the peak Urea application period of August.

In Pakistan, during October, 2011 about 523,000 tons of different fertilizer products were produced. The
major contributor was Urea with 65.2% share and a production of 341,000 tons. Imported quantity was
about 261,000 tons which comprised of 131,000 tons of DAP, 123,000 tons of Urea, 3,800 tons of SOP ,
01,000 tons of MOP and 02,000 tons of NP.

Market Share (Urea)                                                  Urea Offtake-Peer Comparison
                                                               000 tons 10MCY11 10MCY10             Chg
Fauji Fertilizer Company is the market leader for Urea. It
holds 42.1% of the market share, Engro seconds the list with   FFC            2,005       1,829    9.6%
21.5% share whereas,               FFBL,FATIMA, DAWH,          FFBL             363         417 -12.9%
AGRITECH, NFML & PAKARB has 7.6%, 7.5%, 4%,                    ENGRO          1,021         715   42.9%
2.5%, 14.3% and 0.5% respectively. Despite the industry’s      DAWH             190         329 -42.3%
fullest potential to meet the domestic demand for Urea, 11%    Pak Arab          26          55 -53.2%
of it is still imported to fill the Demand-Supply gap on the   FATIMA           355         171 107.9%
back of reduced Gas supply to the industry.                    AGL              119         255 -53.4%
                                                               NFML             681         848 -19.7%
                                                               Total            4,760      4,618     3.1%



                                Urea Market Share in Pakistan (2011)
                                 AGL              NFML
                                                               PAK ARAB
                           DAWH  2.5%             14.3%
                                                                 0.5%
                            4.0%
                       FATIMA
                        7.5%

                                                                         FFC
                         FFBL
                                                                        42.1%
                         7.6%

                                   ENGRO
                                    21.5%




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Market Share (DAP)
                                                                       DAP Offtake - Peer Comparison
Fauji Fertilizer Bin Qasim (FFBL) is the market leader          000 tons   10MCY11 10MCY10             Chg
being a sole producer of DAP in Pakistan. It holds 62.7%        FFBL             523         514      1.8%
of the market share, ENGRO seconds the list through             ENGRO            223         255    -12.5%
imports with 26.2% market share where as Uni Agro,
                                                                Uni Agro          56          88    -36.3%
Chawala and other companies contributing via imports in
                                                                Chawala           17          50    -65.9%
the market have 6.7%, 2.1% and 1.8% respectively.
                                                                Others            15          14      4.9%
                                                                Total            835         922     -9.4%


                                          Market Share (DAP)


                                          Uni Agro       Chawla
                                                                Others
                                           6.7%           2.1%
                                                                1.8%

                           ENGRO
                            26.2%




                                                                         FFBL
                                                                         62.7%


Industry Capacity Share

Since, Fertilizers ensure supply of essential nutrients for the growth of various crops. It holds key
importance in the agriculture sector. Currently country’s fertilizer sector has a total production capacity of
6.7mn tons of Urea and 669thousand tons of Di Ammonium Phosphate (DAP). The sector comprises of 9
companies, each manufacturing different fertilizer products. As far as the sector’s capacity break-up is
concerned, Engro Corp (ENGRO) is now the leading company, equipped with 35.8% of the total country's
Urea manufacturing capacity. Fauji Fertilizer Company (FFC) is only second to ENGRO with 31.9% share
of the Urea installed capacity in the country. Fauji Fertilizer Bin Qasim Limited (FFBL) and Dawood
Hercules have an 8.6% and 6.9% respectively. Fatima Fertilizers Limited (FATIMA), Pak Arab Fertilizer
(PAF) and AgriTech (AGL) complete the list of Urea manufacturing companies, having capacity share of
7.8%, 1.4% and 7.5% respectively.

                                    Industry Capacity Share (2011)
                                   FATIMA            AGL     PAF
                                                     7.5%    1.4%
                               DAWH 7.8%
                                6.9%
                                FFBL                                       ENGRO
                                8.6%                                        35.8%


                                   FFC
                                  31.9%




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As the demand for urea in the country kept increasing, fertilizer manufacturers have constantly increased
their product capacity during 2006 to 2011, growing at a CAGR of 0.4% till 2011.

On the contrary, urea production has failed to take off in similar fashion as compared to the capacity, and
is expected to grow by almost 0.4% by the end of CY11. Nonetheless, the production is expected to
increase further owing to better and continuous supply of gas.



                                            Urea & DAP Production

                                                            Actual
               Production         CY06      CY07    CY08     CY09    CY10      CY11P   CAGR
               Urea               4,804     4,755   4,978    5,046   5,151     4,902   0.4%
               Growth              2%       -1%      5%       1%         2%    -4.8%     -
               Cap. Utilization   114%      110%    109%     107%        91%    84%      -
               DAP                450        357     471     540         647    660    7.9%
               Growth              0%       -21%     32%     15%         20%    2%       -
               Cap. Utilization   101%      80%      70%     81%         97%   119%      -



Why Imports?

Urea off-take in the country, during the past 5 years, has increased at a CAGR of 4%. For CY11, Urea’s
off-take is expected to decrease countrywide due heavy gas curtailment issue, 86% of which is expected to
be produced locally. Going forward, Urea off-take is expected to of 1.75% (5-year CAGR). For CY11,
DAP off-take is expected to decrease by a decent 23% YoY on the back of low base-effect (DAP off-take
was low during CY10 due to massive flood in the country).

While production remains below capacity, urea off-take has started recovering after the impact of last
year’s floods, and is due to rebound in the upcoming Rabi season. Estimates indicate that urea off-take for
the Rabi season will be 3.0-3.4 million tons. This indicates that the country will need to import 200-
300,000 tons of urea if gas curtailment to the fertilizer industry remains at 20 percent on the SNGPL
network, and at 12% on the Mari Gas network.
                                          Urea & DAP Off-take Position

                                                            Actual
               Production         CY06      CY07    CY08     CY09    CY10      CY11P   CAGR
               UREA               5,235     4,917   5,532    6,478   6,123     5,711   1.75%
               Growth              2%       -6%      13%     17%         -5%    -7%      -
               Local Portion      90%       95%      92%     78%         84%    86%    -0.9%
               DAP                1,508     1,390    775     1,691   1,322     1,018   -7%
               Growth              0%       -8%     -44%     118%    -22%      -23%      -
               Local Portion      31%       25%      40%     42%         50%    51%    12%




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OUTLOOK FOR RABI 2011-12

The opening inventory of Urea for upcoming Rabi season is 163,000 tons with imports of 123,000 tons in
October 2011. By December 2011, 700,000 tons would be available through imports and presently
estimated local production of 2.4mn tons for the season. The total availability of urea was estimated at
3.3mn tons, however Ministry of Petroleum and Natural Resources indicated improvement in gas supply to
Urea plants up to December 2011 during Rabi season 2011-12 which would enhance the present estimated
level and enable realization of estimated offtake of 3.4mn tons.

The opening inventory of DAP for Rabi 2011-12 was 224,000 tons. The total availability of DAP would be
910,000 tons, which comprises 381,000 tons of imports and 305,000 tons of domestic production. The
estimated offtake of DAP would be 764,000 tons with closing balance of 142,000 tons.

           Urea and DAP Supply/Demand Situation during Rabi 2011-12
     Description              OCT       NOV          DEC           JAN   FEB    MAR      TOTAL
                                               UREA (‘000 tones)
     Opening inventory         163       104          176          208   -42     -112       163
     Imported Supplies         123       260          440           -     -       -         823
     Domestic production       341       462          442          300   380     480       2,405
     Total availability        627       826         1,058         508   338     368       3,391
     Offtake                   518       650          850          550   450     400       3,418
     Adjustment (+/-)           -5         -            -           -     -       -         -5
     Estimated balance         104       176          208          -42   -112    -32        -32
                                               DAP (‘000 tones)
     Opening inventory          224      215          164          181   156     199        224
     Imported Supplies          131      100            50         50    50       -         381
     Domestic production        68        49            67         25    53      43         305
     Total availability         423      364          281          256   259     242        910
     Offtake                    204      200          100          100   60      100        764
     Adjustment (+/-)           -4         -            -           -     -       -         -4
     Estimated balance          215      164          181          156   199     142        142




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Fertilizer Sector vs. KSE-100
Fertilizer Sector in Pakistan has been performing on the better side as compared to KSE-100 index mainly
due to the continuous increase for fertilizer demand in the markets and still provides 22% support to the
GDP.

Fertilizer sector is to record positive growth, if gas supply to the industry is resumed as ordered by the
court. This domestic production will eventually discourage imports of Fertilizers particularly Urea, as the
industry has enough capacity to meet domestic demand, which is less than 0.3mn tons per annum as per
current production. This will save the country’s foreign reserves and huge amount of subsidy too.

         Reduction in Gas Supply          Low Production          Higher Costs        High Price

Fertilizer sector possess an enviable pricing potential and this makes the sector highly attractive for
making investments. For instance, during CY11YTD, average Urea prices shoot up between PKR 1650 to
1730 and PKR4000-4200 for DAP for 11MCY11. The main reason behind this huge price appreciation is
the acute supply shortage of gas. As continuous gas curtailment keeps on hampering country’s economic
activity, fertilizer manufacturers have increased their prices consistently in order to maintain their
profitability and sustain earnings for their shareholders.

Government has also shown concern over these recent price hikes as it creates immense pressure on
farmers. Currently, the installed production capacity of Urea in the country is 6.9mn tons per annum
against a demand of 6.3mn tons per annum. However, government has decided to import 0.7mn tons by
December 2011 to fulfill immediate shortage for the upcoming Rabi season 2011-12 with US$400mn and
PKR 21bn as a subsidy. Meanwhile, government has also directed the concerned department to ensure the
continuous gas supply to the sector during winter but unfortunately from December 01, 2011 interruption
has occurred in the SNGPL network and associated companies are again facing production losses due to
this gas curtailment.



                                Fertilizer Sector vs. KSE 100 Index
  350                                                                                            13,000

  300                                                                                            12,500

  250                                                                                            12,000

  200                                                                                            11,500

  150                                                                                            11,000

  100                                                                                            10,500

   50                                                                                            10,000

    0                                                                                            9,500
     Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11

           ENGRO         FFC       FFBL        DAWH         FATIMA         AGL        KSE 100 Index




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As per our analysis, the sector’s volume has shown an increasing trend after June, 2011. The sector has
provided maximum share during October and November this year i.e. 26.08% and 27.08% respectively.
This indicates that higher returns in the fertilizer sector were the main attraction for the investors in the
stock market. Simultaneously, the Sector itself benefited from the increasing trend of Urea price in the
local market, justified by gas curtailment & load management policies from the government. This sudden
hike in the Urea prices created provision for investors & speculators to gain healthy returns. Similarly,
Companies are benefiting from the increased prices of their products too, resulting in good margins for
their shareholders. According to our estimates, this scenario will last one more year. So, it’s an opportunity
for the sector players and investors to cash-inn & gets maximum earnings for the shareholders.


                                           Fertilizer Sector vs. KSE-ALL
              4.5                                                                                        30%
   Billions




              4.0
                                                                                                         25%
              3.5
              3.0                                                                                        20%
              2.5
                                                                                                         15%
              2.0
              1.5                                                                                        10%
              1.0
                                                                                                         5%
              0.5
              0.0                                                                                        0%
                      JAN      FEB   MAR     APR    MAY JUNE JULY          AUG      SEP    OCT     NOV

                            KSE All Share Volume         Fertilizer Sector Volume         Sector share




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DAWOOD HERCULES CHEMICALS LIMITED
Top Line Shines amid Gas Curtailment
                                                                                             Sales
According to 3QCY11, the financial result of the company                    12




                                                                 Billions
shows abnormal increase in top line while massive gas
                                                                                9
curtailment is faced by the company since October CY11.
Increase in the revenues can primarily be attributed to the                     6
increased sale price per bag (PKR 1,650 per bag). This                          3
makes the financials attractive for the shareholders,
reflecting top line PKR5bn and EPS of PKR 5.11 at the                       -
end of 9MCY11.                                                                      2009   2010 2011P 2012P 2013P

Low Production Capacity may not Hampers Market Share

Current financials of DAWH shows revenue gains,
whereas, production is not gaining leverage of its group’s                 Production
goodwill compared to its peers. Currently, DAWH has            600


                                                               Thousands
445,500MT per annum capacity, whereas sector’s major           500
players, for instance FFC produced 2.4mn MT in the             400
CY10. This kind of deficiency may not create obstacles in
                                                               300
accelerating market share of the company. It is clear that
DAWH is not taking leverage advantage from the venture         200
with multinational firm and association of renowned            100
business tycoons due to gas curtailment issue. On the           -
other hand, market leaders have an advantage as they have             2009 2010 2011P 2012P 2013P
higher production capacity. Despite low production
capacity, DAWH market share is expected to remain constant as other companies which are producing
more will first fill up the gap between domestic production and imported supply. In this regard DAWH
safely move forward with this low production capacity and will maintain its market share successfully for
the upcoming years.

Gas Load Shedding should be Stopped

Gas load shedding in the fertilizer sector started in April 2010, when the government decided to divert gas
supplies to power plants in order to reduce electricity load shedding. DAWH also suffered from it i.e. they
utilized only 56% of its total plant production capacity as of 9MCY11. Resolution of the gas curtailment
issue is important for overall economy& its growth. Currently, gas shortage of around 20-25% prevails in
the country, but the SNGPL network faces an even higher shortage of up to 40%. DAWH pays a very huge
cost of this unusual shortage due to its reliance on the SNGPL’s network. Government has ensured that gas
supply will commence by December, 11, which is a positive sign for the SNGPL network companies to
enhance their productivity for the fulfillment of upcoming fertilizer domestic demand of the country.

ENGRO Tie-Up

ENGRO remains one of the biggest success stories of corporate sector of Pakistan, and is likely to become
the country’s leading multi-national in the years to come. Most of its businesses, including fertilizers,
foods, and power have strong underlying business economics based on the needs of the Pakistani
economy. According to the investment perspective is the high amount of leverage it carries, which makes
it capable to exogenic shocks like the current unplanned gas load shedding. From ENGRO’s perspective,
the high level of debt is justifiable because they are operating in stable businesses with strong cash flows.

Gas curtailment issue is only faced by the EnVen plant, while old plant is safe as it uses the supply from
Mari gas network. This curtailment allowed ENGRO to increase its price per bag by PKR 200 per bag to



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PKR 1,580 per bag (ex-factory price). This allowed ENGRO to generate huge profits being a 26% holding
in the market share. However, court directed the government to restore its gas supply and ENGRO reverted
the price hike. Unfortunately, again gas curtailment provides a chance to increase prices during the season.
This would generate attractive top line and boost cash flows and earnings for their shareholders.

In this regard, ENGRO association is also a key factor for DAWH with 38.14% share to enhance their
bottom line with its share of profits. ENGRO’s better outlooks for CY11 till CY15, according to our
calculations provide extra strength for the DAWH. Although, ENGRO’s earnings decline due to gas load
shedding will be covered by rising of Urea prices. We expect ENGRO to give an EPS of PKR 23.2 and
PKR 27.3 in CY11 and CY12 respectively and Debt to Equity Ratio of 75:25

100% Gas Supply Supercharge Full Capacity-Best
Case
                                                                         Gas Supply (mmcfd)
Government has promised to supply gas to the fertilizer
sector during the upcoming Rabi season FY12 which is a          60
green signal for DAWH as 100% gas supply will boost its         40
productivity. If this condition is accomplished, it will
generate maximum revenue for its shareholders and               20
provide better earnings. According to our sensitivity
                                                                 0
analysis, the best case scenario is when DAWH would
receive 100% gas supply, its top line would grow to PKR              2009    2010 2011P 2012P 2013P
9.5 billion and EPS to PKR 12.19 for its shareholders.

Gas Curtailment provide High Margins

Although, gas curtailment hampers the production
capacity of DAWH up to 56% utilization during CY11, on                      Gross Margin (%)
the other hand its positivity reflected in the top line with    60
PKR 6billion and 53% margins due to charging of higher          50
prices in the local market up to PKR 1750/bag of Urea.          40
However, it have an agreement with the government for           30
the continuous supply of 38mmcfd gas to the plant but
                                                                20
presently government only provide 60% of it. In this
                                                                10
regard DAWH is getting advantage of high margin just
                                                                 0
like peers in the industry. If DAWH gets 100% gas
supply, according to our sensitivity analysis its margin             2009    2010 2011P 2012P 2013P
would surge to 57% with the assumption of fixed prices.




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Sensitivity Analysis

Due to gas curtailment issue and some government decisions regarding fertilizer sector, we have
developed some different scenarios for the analysis.

Base case refers to the actual situation and provides the current status of the production capacity and
related financials. The assumption is that limited gas supply would continue to hamper production. The
production capacity utilization is assumed at 65%, 75% and 82% for CY11, CY12 and CY13 respectively.
The best case assumes that no gas shortages would be faced by the company and it would utilize 100% of
its name plate capacity.

                                        Production vs. Financials
                         Gross Margin                  PAT ('000)                         EPS
                    Base Case      Best Case     Base Case     Best Case      Base Case         Best Case
   2011P                50%          54%         4,544,852     5,866,134        9.44              12.19
   2012P                55%          57%         6,023,910     7,102,076        12.52             14.76
   2013P                52%          53%         6,414,229     7,103,537        13.33             14.76


Projections – Summary

                                      2011P         2012P           2013P         2014P             2015P
 Sales Net                           9,591,882    10,916,978    10,698,638      10,916,978        10,698,638
 Gross Profit                        5,194,958     6,203,897     5,622,262      5,315,073         4,639,631
 Operating Profit                    5,407,529     6,725,624     6,538,665      6,379,310         5,701,337
 Net Profit                          5,866,134     7,102,076     7,103,537      7,094,174         6,803,383

 Equity & Liabilities
   Total Equity                     21,633,137    24,700,062    27,679,133      29,463,762        30,545,604
   Short term financing-secured       50,000       1,000,000        50,000       50,000            50,000
   Trade and other payables          602,318        645,627         695,394      767,384           830,001
 Assets
   Property, plant and equipment     1,731,772     1,606,845     1,526,391      1,466,900         1,423,575
   Stock in trade                    301,159        322,814         347,697      383,692           415,000
   Total receivables                 227,089        142,139         139,224      149,243           157,540
   Short term investments            2,561,928     1,793,349     2,241,687      2,802,108         3,502,635
 Total Assets                       28,333,509    27,351,743    29,430,581      31,287,201        32,431,659




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                                             Ratio Summary
                          2008       2009       2010    2011P    2012P    2013P    2014P       2015P
Gross Margin              42%        36%        40%      50%      55%      52%      48%         43%
Net Margin                49%        -4%        47%      73%      74%      73%      71%         67%
EPS (Basic & Diluted)     32.99      -4.11     17.86     9.44    12.52     13.33   13.49        13.49
Total Assets Turnover     0.29       0.40       0.32     0.23     0.32     0.33     0.32        0.33
Fixed Assets Turnover    559.1%    823.5%      465.7%   360.0%   508.2%   576.2%   622.8%     678.2%
Book Value per share     158.91     163.23     162.43   42.61    47.08     52.06   54.89        56.71
Return on Equity         20.76%     -2.52%     21.00%   22.16%   26.58%   25.60%   24.57%     23.78%
Current Ratio             3.19       2.01       2.46     0.96     1.92     4.35     5.15        5.44
Quick Ratio               2.01       1.23       1.59     0.60     0.91     2.69     3.57        3.98




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                        ISO 9001:2008 Certified Corporate Brokerage                                                                                            Equity
                        House


Research Team

Amjad Nazir                                    Chief Operating Officer                                            coo@mmsecurities.com.pk                                            +92-21-35396983
Shahid Ali                                     Head of Research                                                   shahid@mmsecurities.com.pk                                         +92-21-35317703 (114)
Ijaz-Ur-Rehman                                 Research Analyst                                                   ijaz@mmsecurities.com.pk                                           +92-21-35317704 (114)
Sana Waqar                                     Research Analyst                                                   research@mmsecurities.com.pk                                       +92-21-35317704 (114)
Afak Nazim                                     Research Analyst                                                   afak@mmsecurities.com.pk                                           +92-21-35317704 (114)
Sania Zulfiqar                                 Research Analyst                                                   sania@mmsecurities.com.pk                                          +92-21-35317704 (114)


Sales Team

Saqib Hussain                                 Head of Sales & Marketing                                           saqib@mmsecurities.com.pk                                          +92-21-35313911 - 2
Yasir Saleem                                  Coordinator Sales– Corporate                                        yasir@mmsecurities.com.pk                                          +92-21-35388719
Asif Raza Rawjani                             Coordinator Sales– Corporate                                        raza@mmsecurities.com.pk                                           +92-21-35313913
Salma Aamir                                   Coordinator Sales– Corporate                                        salma@mmsecurities.com.pk                                           +92-21-35317706
Shahzada Haris Rasheed Coordinator Sales– Corporate                                                               hairs@mmsecurities.com.pk                                          +92-21-35317705
Muhammad Imran Alvi                           Senior Equity Sales                                                 imran@mmsecurities.com.pk                                          +92-21-35396982
Muhammad Farhan                               Senior Equity Sales                                                 farhan@mmsecurities.com.pk                                         +92-21-35897063
Rana Saghir Ahmed                             Sales Coordinator                                                   rana@mmsecurities.com.pk                                            +92-21-35313914
Aamir Qazi                                    Sales Coordinator                                                   aamir@mmsecurities.com.pk                                          +92-21-35313914
Shahwaiz Jouzy                                Sales Coordinator                                                   s.jouzy@mmsecurities.com.pk                                        +92-21-35317706
Muhammad Ubair                                Sales Coordinator                                                   ubair@mmsecurities.com.pk                                          +92-21-35396982

Contact us:

M.M. Securities (Pvt.) Ltd.
M. M. Tower, 3 – C, Khayaban-e-Ittehad, Phase – II, Extension,
Defence Housing Authority, Karachi – 75500, Pakistan. P.O.Box # 12414.

Tel : +9221-35317703-04 , Fax: +9221-35895328
http://www.mmsecurities.com.pk, Group: http://www.mmgoc.com.pk




  Analysts’ Certification:

  I, Ijaz-ur-Rehman, is the author of this report, hereby certify that all of the data, facts and figures and views expressed, in this research report
  accurately reflect our personal views about any and all of the subject issuer(s) or securities. I also certify that no part of my compensation was, is,
  or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.

   Disclaimer: This report has been prepared by MMSPL. The information and opinions contained herein have been compiled or arrived at based upon information obtained from sources believed to be reliable and in good
   faith. Such information has not been independently verified and no guaranty, representation or warranty, express or implied is made as to its accuracy, completeness or correctness. All such information and opinions are
   subject to change without notice. This document is for information purposes only. Descriptions of any company or companies or their securities mentioned herein are not intended to be complete and this document is not,
   and should not be construed as, an offer, or solicitation of an offer, to buy or sell any securities or other financial instruments. MMSPL may, to the extent permissible by applicable law or regulation, use the above
   material, conclusions, research or analysis before such material is disseminated to its customers. Not all customers will receive the material at the same time. MMSPL, their respective directors, officers, representatives,
   employees, related persons may have a long or short position in any of the securities or other financial instruments mentioned or issuers described herein at any time and may make a purchase and/or sale, or offer to
   make a purchase and/or sale of any such securities or other financial instruments from time to time in the open market or otherwise, either as principal or agent. MMSPL may make markets in securities or other financial
   instruments described in this publication, in securities of issuers described herein or in securities underlying or related to such securities. This document may not be reproduced, distributed or published for any purposes.

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