Report
Team AKD Research
EUR 9.28 For Business Accounts Only

Pakistan Market: Gas price hike adds fuel to the fire, (AKD Daily Jun 25, 2019)

  • OGRA has reportedly proposed gas price hikes of 31% and 20% for SNGP and SSGC consumers, while cushioning export oriented Textile sector. This will generate PKR508bn as opposed to PKR487bn of revenue requirement, bringing down the circular debt stock (PKR180bn) by PKR21bn. 
  • As per proposal, gas tariffs for domestic consumers are expected to witness a higher increase of 85.2% (avg.), this would increase our inflation estimate for FY20 by 134 bps on average, suggesting further interest rate hikes.
  • The increase in gas prices will negatively impact sectors which have limited pass-on ability including Cements (LUCK/DGKC to witness 13/3% earnings erosion for FY20), Steel and Chemicals, while Fertilizer players appear likely to pass on the gas tariff hike impact (PKR183/bag –urea). Assuming zero pass-on, FFBL is expected to be worst hit, with EFERT being least impacted.
  • Continuing its support for the export sector, the GoP is likely to keep gas prices unchanged for Punjab based zero-rated industry at US$6.5/mmbtu. However, Southern players (i.e. GATM & GADT) will see a price hike of 31% adversely impacting their bottom line.
Underlying
Sui Southern Gas Co. Ltd.

Co. is a holding company and is engaged in the following activities: purification of natural gas ex-Sui Field and its transmission along with gas from Sari Hundi, Badin, Kandhkot, Mari, Daru and Kadawari gas fields; distribution of natural gas in Sindh and Balochistan provinces; manufacturing and sale of gas meters; sale of gas condensate as a by-product; and construction contracts for laying of pipelines.

Provider
AKD Securities Limited
AKD Securities Limited

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.

Analysts
Team AKD Research

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