Having recovered 4.5% in the prior week, benchmark of
Pakistan Stock Exchange went back into the red zone during the week ended 28th
April 2017 closing at 49,301. Analysts attribute this fall to new disclosure requirements
by SECP, and continued political uncertainty with futures rollover week further
aggravating the decline. Average daily traded volumes increased by more than 29%WoW
to 359 million shares with volume leaders being EPCL, ASL, ANL, SMBL and TRG.
Key news flows during the week included: 1) PSMC unveiling the 1,000cc Celerio
(re-branded as the new Cultus) at a ceremony held in Lahore, 2) PPL announcing discovery
of 29.2mmscfd gas from its Gambat South block (65% working interest), 3) announcement
of Punjab Orange Cab scheme for the unemployed youth by CM Punjab, with expected
scheme size of 100,000 units, 4) GoP raising Rs360 billion through auction of
short‐term
government papers and 5) GoP notifying a relaxation of the moratorium on new gas
connections for industrial, commercial and captive power plants directing the
gas utilities to implement it with immediate effect. Gainers of the week were AGTL,
PSMC, INDU, ASTL and HCAR; while laggards included PPL, EFERT, NCL, NML and
CHCC. Foreign participation continued its negative trend with US$10.71 million outflows
compared to US$31.97 million in the prior week. With the result season nearing
its end, analysts expect the market to remain range-bound amid lack of triggers.
Contrary to February, country's total exports during March'17
rebounded 9.9% MoM/3.4%YoY to US$1.8 billion, where textile exports (60% of
total exports) posted marked recovery to clock in at US$1.064 billion up 7%MoM.
The upswing in the textile exports in March'17 was primarily driven by 9.9%YoY
growth in value added exports to US$775 million, while non‐value
added exports declined to US$289 million down 2.5%YoY. On a cumulative basis, 9MFY17
textile exports were still 0.77%YoY lower at US$9.29 billion, largely
contributed by 8.5%YoY decline in the low value segment diluting the impact of
2.5%YoY growth in the value added segment. Looking ahead, textile exports are
likely to remain under pressure due to: 1) demand side bottlenecks emanating
from depressed Chinese demand and slowdown in EU, post Brexit, 2) liquidity
crunch faced by textile sector due to delay in tax and rebate refunds amounting
to Rs300 billion and 3) continuous upward trend in international and local cotton
prices, raising cost of doing business. Having said that, recent appreciation
in regional currencies as compared to slight depreciation in the PkR/US$
coupled with Rs180 billion export package, may extend some support to the declining
exports, going forward.
Fauji Fertilizer Company (FFC) posted unconsolidated
profit after tax of Rs2.19 billion (EPS: Rs1.72) for1QCY17 as compared to net
profit of Rs2.73 billion (EPS: Rs2.14) for 1QCY16, down 20%YoY. Earnings came
in slightly above market expectation due to 5.4% higher than expected topline
on the back of greater than anticipated offtake growth. Key highlights of
1QCY17 earnings includes: 1) a 4%YoY decrease in topline to Rs11.19 billion
reflecting 4%YoY expected slowdown in Urea offtake coupled with low urea prices
and 2) improvement in gross margin to 31.5% (including subsidy) during 1QCY17
due to low feed gas prices (down 39%YoY) restricting earning decline. Along with
results, the company also announced an interim cash dividend of Rs1.50/share.
Indus Motor Company (INDU) reported robust earnings for
the 3QFY17 amounting to Rs4.17 billion (EPS: Rs53.05) higher by 41%YoY, beating
out estimates and recording its highest earning quarter ever. Stellar earnings were
the outcome of: 1) topline growth of 16%YoY, where the deviation may have
occurred from higher CBU sales, 2) improved margins of 19.2%, signifying
improved margins for the facelift Revo and Fortuner variants and 3) effective
tax rate of 30% 1QFY17. On the flip side, finance costs rose 899%YoY due to the
late payment on deliveries and below the line expenses increase tapering the
bottom-line. Net profit for 9MFY17 rose to Rs10.24 billion (EPS: Rs130.34)
up 16%YoY, with total payouts over the period at Rs80/share. Thus the company
has a higher payout ratio that added to the planned CAPEX of Rs3.5 billion for
FY17, points to improved liquidity at the OEM.
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