Thall Limited : Progress on energy sector projects is key near term catalyst
- We revise down our earnings estimates of Thal Limited (THALL) by 8-20% over FY18-FY22E incorporating (i) lower earnings for INDU, (ii) actual corolla sales in FY18TD, and (iii) drop in auto sales in FY19 due to budgetary measure by govt. Consequently, we arrive at a SoTP-based TP of PKR653/sh.
- Despite earnings estimates cut, we maintain our liking and Buy recommendation on the stock. Growing product portfolio in engineering, impressive sales in building & allied materials segment, near-term triggers in power segment underpin our liking.
- THALL is all set to offer complete automobile seat solution via capex in new facility at its subsidiary (THALL owns 55%), which currently makes only few parts for seat. New product may offer major upside to our numbers.
- Both of THALL’s energy sector projects are progressing at a decent pace where financial close of its 330MW coal based power plant is key near-term upside trigger while commissioning of coal mining venture is targeted in 2HFY19.
- Key risks to our thesis include (i) prolonged adverse regulatory action on car sales, (ii) delay in energy sector projects, and (iii) sharp hike in raw material prices of jute and papersack segments.
Thal Limited. Thal Limited is engaged in the manufacture of jute goods, engineering goods, papersack and laminate sheets. The Company operates in three segments: Engineering; Building Materials and Allied Products, and Real estate management & others. The Engineering segment is engaged in the manufacturing of automotive parts. The Building material and allied products segment includes jute, papersack and laminate operations. The Real estate management & others segment includes the real estate management, trading and share registrar and management services. It is a supplier of wire harness products to various automobile original equipment manufacturers (OEMs) in Pakistan. It is engaged in the manufacturing of A. Twill Sacks, B. Twill Sacks, Coffee Sacks, Sugar Sacks, Heavy Cees, Light Cees, Hessian Cloth and Hessian Bags (ordinary/natural white). Its jute operations are located at Muzaffargarh, engineering operations at Karachi, papersack operations at Hub, and Gadoon and laminate operations at Hub.
BMA is amongst the leading financial groups in Pakistan. BMA Capital’s core areas of business include Capital Markets, Corporate Finance & Advisory, Asset Management, and Financial Products Distribution. BMA Capital is the leader in privatisation advisory in Pakistan, having successfully advised on over 50% of all privatisations in Pakistan, by value, in transactions valued in excess of US$4 billion. Recent transactions include joint lead managing the $813 million GDR Offering of 10% of OGDCL on the London Stock Exchange in 2006-07, and advising Etisalat on their successful acquisition of a 26% strategic stake in Pakistan Telecommunications Company Limited (PTCL) for US$2.6 billion, the largest M&A transaction and foreign direct investment in Pakistan’s history. The firm is among the top brokers in the Pakistan equity and treasury markets, and is among a handful of firms that comprehensively cover all segments of the capital markets. This is supported by a very strong and independent research capability, which is quoted regularly in both local and international media. BMA Capital’s retail brokerage brand, BMA Trade, has launched a nationwide network of branches as well as a comprehensive online trading platform, enabling investors across Pakistan to take part in the capital markets.
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