Intermarket Securities Limited (IMS) is a full service corporate brokerage firm based in Karachi, Pakistan. We service both domestic and international clients. IMS was ranked #2 Best Local Brokerage and #3 Best for Overall Country Research for 2016 by AsiaMoney.
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Yusra Beg
- Yusra Beg
Intermarket Pulse: Pakistan Food producers: 1QCY18- Another weak quart...
IMS Food Universe (EFOODS, NESTLE, NATF and UPFL) posted combined 1QCY18 NPAT of PRs3.9bn, down 12%YoY (incl. FFL: down 17%YoY). Dairy company profits dropped 15%YoY (NESTLE- Dairy segment, EFOODS and FFL) while non-dairy results (NESTLE- Beverages, NATF and UPFL) depicted a 13%YoY decline; UPFL outperformed. Dairy players, Nestle (dairy) and particularly FFL reported a 6%/54%YoY jump in revenue, on expanding UHT footprint, although translation bottlenecks remain for FFL (1QCY18 LPS: PRs1.17 ...
Ailia Naeem
- Ailia Naeem
Pakistan IPPs: Favor NPL over NCPL in a tougher macro environment
We revisit our investment case on Nishat IPPs, while incorporating revised USD/PKR and Furnace oil price assumptions. With USD hedged ROEs and fuel savings and penal income linked to FO price, this has led to an upward earnings revision for both IPPs to the tune of 10-12% over next 3 years. However, we have revised down our DPS estimates in the face of immediate cash constraints. Our new TPs for NPL and NCPL are PRs36/sh and PRs25/sh respectively, implying a Buy call on NPL. We prefer NPL gi...
Raza Jafri ... (+2)
- Raza Jafri
- Yusra Beg
Intermarket Pulse: Pakistan Banks: Valuation anomaly warrants switch t...
Medium banks in Pakistan now trade at a premium to large banks, something that has not happened in close to 10yrs. This follows (i) one-off hits for large banks e.g. pension fund charges, (ii) concentrated foreign selling pressure and (iii) higher capital requirements for systemically important banks (D-SIBs). As the large banks go through a tough period, growth posted by medium banks has been impressive. This valuation anomaly may only be temporary, however. Save for the D-SIBs classificat...
Abdul Samad Khanani
- Abdul Samad Khanani
FFC: GIDC resolution holds the key, upside triggers remain; Neutral
We tweak our estimates for FFC with a new Dec’18 TP of PRs101/sh, backed by slightly higher Urea prices in CY18, 10% cut in DAP offtakes for CY19/20F and settlement of GIDC/subsidy accruals by CY19F. Recent developments on water scarcity has reportedly unfolded an alarming situation in Sindh and Punjab, especially for sugarcane and rice crops. We believe negative implications would be mostly visible in P/K nutrient offtakes (DAP/NP/NPK), following healthy demand trends witnessed in last 5yrs ...
Ahmed Raza
- Ahmed Raza
Intermarket Pulse: Pakistan Autos: Moderate growth due to Ramadan fact...
Pakistan’s Auto industry registered sales of 21,813 units in May’18, up 5%YoY, translating 11MFY18 sales to 240,114 units, up 21%YoY. This was the industry’s slowest YoY growth for a month since Oct’17 due to usual lackluster activity observed during Ramadan. Tractor sales reached 6,753 units in May’18, up 19%YoY, as Kharif (summer) sowing season continues. Such numbers, however, can turn out to be unsustainable if concerns over water shortages materialize. With another round of PKR depreci...
Syed Waqas Imam
- Syed Waqas Imam
Intermarket Pulse: Pakistan Steel: Mixed trend expected in 4Q earnings...
We expect the steel rebar producers – ASTL and MUGHAL – to post sequential earnings decline in 4QFY17 results. We thus tweak our expectations for annual results accordingly. The expected decline is due to slower sales, but it will be moderated by uptick in margins, in our view.ASTL is expected to post 10% lower earnings QoQ due to lower sales expectation. Meanwhile, MUGHAL is expected to post a 6% QoQ increase due to higher margins with higher sales of premium rebars expected for the quarter...
Pakistan Autos: Highest ever car sales in FY17
Pakistan’s Auto Industry sales posted decline of 6%YoY in Jun’17, mainly because of less working days due to Eid holidays. However, industry sales for FY17 posted a healthy 13% YoY growth ex-Apna Rozgar Scheme. Tractor sales posted a phenomenal 61%YoY growth in FY17, reaching a total of 54,361 units. For Jun’17, growth was largely driven by AGTL with sales of 1,516 units (34% share of Jun’17 sales), up by 38%YoY. Conducive environment for auto sales and another taxi scheme by Punjab gov...
Ailia Naeem
- Ailia Naeem
Intermarket Pulse: Pakistan IPPs: Subdued FY17 earnings; modest payout...
IMS Universe IPPs’ cumulative profits for FY17 are projected to be PkR35.35, down 2%YoY in FY17. In 4QFY17 alone, the cumulative earnings are expcted to post 1%YoY decline. Except for KAPCO, there was not any major jump in utilization in 4Q; and payouts overall are expected to be modest. For 4QFY17, we expect HUBC to post consolidated EPS of PkR2.04 where lower dispatch factor shall keep O&M payments in check. In full year FY17, overhauling of Narowal engines is expected to hurt profitability ...
Ailia Naeem
- Ailia Naeem
Intermarket Pulse: Pakistan IPPs: Overall tariff on a decline; payout ...
As per NEPRA, electricity generation for May’17 clocked in at 10,880GWh, up 9%YoY/23%MoM. Contribution of hydel generation in energy mix increased substantially, leading to a decline in average tariff. With historically higher contribution of hydel based generation in May-Sep’17, the average tariffs shall remain in check near term. Higher oil price in 12M has evidently led to lower dispatch from major FO based players, where energy dispatched by HUBC base plant in May’17 decreased 11%YoY....
Pakistan OMCs: Good year of sales growth with a soft end
Overall OMC sales declined 4% YoY in Jun’17, unlike full-year FY17 sales (up 8% YoY) which were led by robust demand in all major products. Sales of HSD/Mogas grew phenomenally (up 8/16% YoY) as we had expected. FO sales, though down 12% YoY in Jun’17, remained strong throughout FY17 amid rising RFO based power generation. In 4QFY17, a sharp decline was seen in international oil prices of 10.3% and prices of Gasoline also declined in tandem. This could mean that OMCs would have had the oppor...
Muhammad Saad Ali
- Muhammad Saad Ali
Intermarket Pulse: Pakistan Economy: IMF advises same policy prescript...
In its Post-Program Monitoring Discussions, IMF expects Pakistan to achieve GDP growth of 5.6% and inflation to remain contained (avg. 5.0%) in FY18. However, it is concerned about the present external/fiscal imbalances; which, if let to widen at the current rate, could undermine growth and Pakistan’s capacity to repay IMF. The major policy recommendations are greater exchange rate adjustment, monetary tightening, containing fiscal deficit to 5.0% of GDP, and addressing circular debt bui...
Raza Jafri
- Raza Jafri
Pakistan Strategy: KSE-100: 50,000 is the new 60,000
With the PML-N government still intact, the swift decision to nominate current Punjab CM Shehbaz Sharif for Prime Minister (after a transition period) will likely lead to a relief rally in the KSE-100, continuing the reversal that saw it recover 3.8% from its intraday low on Friday. However, political and macroeconomic challenges remain; PTI will be seen to benefit in the next elections particularly if some electables switch parties. PML-N will likely adopt a populist agenda over the next 6-9m b...
Raza Jafri
- Raza Jafri
Pakistan Strategy: Where is the Market P/E really at?
Various P/E levels are floating in the market, from as low as 8.5x to Bloomberg consensus of 9.0x. Based on 85 constituents of the KSE-100 Index, we estimate forward P/E is at 9.6x, higher than Bloomberg consensus due to inclusion of pharmaceutical & consumer companies which trade at higher multiples. We estimate that at its CYTD peak, the KSE-100 was trading as high as 12x. Knowing the true P/E can help determine the levels this market can potentially trough out at. The 10yr average P/E is 9.3x...
Muhammad Saad Ali
- Muhammad Saad Ali
Pakistan Strategy: Sudden slide in the PkR; stability hereon is likely
The PkR saw 3% depreciation vs. the US$ yesterday with the interbank rate closing at 108.24. This is against 0.4% depreciation in full-year FY17 and 2.9% in FY16 (average depreciation since 2014 is 1%pa). With the SBP stating that this will address the emerging imbalance in the external a/c, it appears that the central bank chose not to intervene. Hereon, the PkR can (i) continue to slide uninhibitedly, (ii) consolidate around 108 levels, or (iii) retrace today’s slide back towards 105. We th...
Pakistan Economy: Signs of growth intact; but worries on BOP
SBP’s latest 2QCY16 report has expressed satisfaction over the state of the economy, with an accommodative monetary policy stance, increase in development spending, and substantial increase in lending to the private sector supporting the ongoing growth momentum. FY17’s GDP growth rate is set to surpass FY16’s level of 4.7%YoY. That said, concerns on the external front are becoming more prominent. Trade deficit has widened by 34%YoY, with bulk of the corporate expansion cycle yet to materi...
Raza Jafri
- Raza Jafri
Pakistan Market: Valuations are eye-catching; FM funds may return
The KSE-100 Index saw another weak session yesterday, its 3.7% decline taking the MTD fall to 11.2%. The Index is now at its lowest level since early Dec'16 and down 15.1% from its CYTD peak. Volumes remained on the lower side with investors sitting on the sidelines ahead of the Eid holidays. Flows and sentiment continue to detract from fundamentals, in our view, where market P/E of 10.2x is now at a 20% discount to MSCI EM. Several stocks in our coverage are trading below 6x and 5-6 names are ...
Raza Jafri
- Raza Jafri
Intermarket Pulse: Pakistan Market: Focus on enduring themes
In the much awaited Panama Leaks verdict, the Supreme Court yesterday ordered the formation of an investigative commission with PM Sharif staying at the helm. The decision triggered a relief rally at the bourse, with the KSE-100 Index gaining 2.3%, on top of the 1.6% return a day earlier. With political noising abating for now, attention may come back towards the MSCI EM upgrade and underlying corporate profitability; however, any resurgence in noise may keep a lid on valuation rerating (P/E al...
Raza Jafri
- Raza Jafri
Pakistan Market: Mar’17: Weak month leads to flattish close for the ...
The KSE-100 Index shed 0.8% in Mar’17, leading to a flattish close for 1QCY17 vs. 13% gains for MSCI Asia Pac (ex-Japan) in the quarter. While the year got off to a strong start with gains standing at 5% at one point, political and regulatory noise dampened volumes and investor sentiment.Foreign selling continued for the fifth consecutive month, although outflows were modest (US$23mn vs. average c.US$100mn in the past). Net outflows were largely concentrated in Cements (performance down 3%), w...
Raza Jafri
- Raza Jafri
Pakistan Market: Jan’17: KSE-100 returns 2% led by domestic liquidit...
​After a 20% run-up in the last two months of 2016, the KSE-100 gained 2.0% in Jan’17. FPI saw outflow for the 3rd consecutive month, but US$100mn was slightly slower than 3m avg. of US$125mn. Returns could have been higher, but consternation regarding US travel ban on regional countries and enhanced SECP vigilance on local brokerages triggered profit taking in last few days.On the political front, hearings on the Panama Leaks resumed but has not reached any conclusion so far. SBP kept inter...