EFOODS_Concentration risk running high
Tough operational dynamics continue to mar EFOODS financial performance where we expect the company to round off CY17F on a weak note. In this regard, revenues are likely to come down by 18%YoY where gradual fragmentation of the industry in the backdrop of increasing competition has inhibited conversion to packaged milk, impacting volumetric growth. Additionally, GM is expected to come down to 17.2% in CY17F (vs. 22.6% in CY16) on account of adverse regulatory developments (enhanced duty on powdered milk, moved to tax-exempt from zero rating regime) coupled with recovery in international milk prices (FAO Dairy index up 31%YoY). All these factors are likely to manifest in CY17F earnings where we expect the company to post NPAT of PkR562mn (EPS: PkR0.73), down 76%YoY. While the stock has rallied 22% MTD, we remain unconvinced on further price performance as the company continues to struggle on multiple fronts - PFA's campaign against tea whiteners (labeling requirements) being the most prominent for now. In this backdrop, we continue to remain apprehensive until possible product initiations come through. At current price level, the stock trades at high multiples (forward PE/PS at 79.8x/1.71x) vindicating our Reduce stance.
FrieslandCampina Engro Pakistan Ltd Formerly known as Engro Foods Ltd. FrieslandCampina Engro Pakistan Limited, formerly Engro Foods Limited, is a Pakistan based company engaged in the manufacturing, processing and marketing of dairy products, fruit drinks and frozen desserts. The Company also owns and operates a dairy farm. The Company's segments include Dairy and beverages; Ice cream and frozen dessert, dairy farm and Others. The Company's brands include Olper's, Olper's Lite, Omore, Dairy Omung, Olper's Lassi and Tarang. The Company offers frozen desserts in cups, sticks, cones and family packs. The Company's exports portfolio consists of branded products, anhydrous milk fat (AMF) and unsalted butter. Its branded products include milk, beverages, tea whitener and others. The Company offers olper's full cream milk, olper's lite, olper's cream, olper's tarrka and olper's dobala. Olper's Lite is a low-fat, hi-calcium milk. The Company has operations in countries, such as Mozambique, Sri Lanka, Singapore, Guinea, Libya and the United Arab Emirates.
AKD Securities Ltd. is one of the leading securities firm in Pakistan, providing a comprehensive range of investor focused services, including equity brokerage, economic and securities research, investment banking and financial advisory services. AKD Securities accounts for more than 6% of the average daily value of the Karachi Stock Exchange. AKD Securities was the first brokerage house to launch an online trading platform in Pakistan in November 2002 and now has the largest market share with over 6000 customers. This has helped diversify and expand the retail investor base in the country and ushered in a whole new universe of investors to the stock market.
AKD Securities Ltd. caters to a diversified group of domestic and international institutional investors, high net worth individuals and upscale retail clients, including expatriate Pakistanis. With high quality research, unparalleled execution and distribution capability for both regular and large block trades, AKD Securities Ltd. has earned an outstanding reputation in the Pakistani securities industry.Outside of commercial banks, AKD Securities Ltd. is one of the biggest capital market firms in the country. AKD Securities is the leader in raising and providing risk capital in underwriting, market making and mergers and acquisitions in Pakistan. Good corporate governance and professionalism are emphasized throughout the firm and AKD Securities Ltd. is amongst the very few companies to have introduced a firm-wide comprehensive CODE of ETHICS, overseen by an independent compliance manager.Ultimately, our success is based on the quality of service we provide to our customers and the trust and confidence reposed in us by them. Our focus, therefore, remains on customer satisfaction at all levels in the company.
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