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Recommendation HOLD We initiate our coverage on Maple Leaf Cement Factory with a HOLD

Current Price 75.79 stance on the scrip, offering an upside potential of 6.05% including 3.37%
of dividend yield. MLCF is currently trading at a trailing and forward P/E
Target Price 77.82 multiple of 8.43x and 11.73x. The 3-yr average $EV/Ton of the stock is
D/Y 3.37% $120/Ton.
Upside 6.05%
Key Stats Demand is Intact
Demand for cement is to remain upbeat on the back of increased activity in government and
Market Cap (PKR bn) 45.715 private sector housing scheme, rising urbanization, CPEC related infrastructural projects,
Market Cap (USD mn) 394.89 construction of motorways, water reservoirs and various hydel power projects and with
election just around the corner, we believe demand for cement to remain sturdy during the
52w Low - High 63.05 – 128.82 remainder of the current fiscal year.
Outstanding shares 593.7 mn
Free float 45% KATAS RAJ - Blessing in Disguise
As per MMDP report, since MLCF lies in the safe zone and relies on own sources of water, it is
Adj. Beta 1.29
highly plausible that the company may be given green light by the Supreme court while other
Relative Performance Graph companies in the negative zone will have to search for other alternatives or cede expansions.
This is likely to bode well for MLCF in setting strong foot hold in the region.
30.00%
20.00%
10.00% Brownfield Expansion – Effort to Retain Market Share
0.00% In order to retain its market share MLCF has also announced a brownfield expansion project
-10.00% (line-3) to be setup at its existing site, thereby taking total capacity to 7.3 MT. The project is
-20.00%
worth PKR 23Bn, financed through 48% debt and 52% of equity out of which 19% was raised
-30.00%
through issuing 12.5% right shares.
May-17

Jun-17

Jul-17

Aug-17

Sep-17

Oct-17

Nov-17

Dec-17

Jan-18

Feb-18

Mar-18

Energy Mix is All Set to Get Efficient


IndexResearch
Source: PSX, ASDA Performance MLCF Performance
The Installation of 40MWcoal fired plant will further lower its dependence on national grid
Source: PSX, ASDA Research
and thus will eventually make MLCF self-reliant on captive power plants. It was established
April 18, 2018 through 100% wholly owned subsidiary ‘Maple Leaf Power Limited’. The plant was imported
from Chinese firm ‘Sinoma Energy Conservation limited’ and is build in vicinity to MLCF
Iskanderabad plant to ensure uninterrupted power supply.

Valuation
The target price is derived using Discounted cash flow method (FCFF). The target price for
Samia Umer June 2018 is valued at PKR 77.82. This offers a total return of 6.05% including 3.37% of
Investment Analyst dividend yield.

research@asdalive.com Key Investment Risks


+92 21 32435322 The risks to our target price is 1) Further devaluation of PKR 2) Hike in Interest rates
3) Lower than anticipated demand 4) Unexpected surge in coal prices 5) Price war as a result
Refer to last page for important disclosures. of supply glut and 6) Delay in commencement of operations of new plant.

ASDA Research Reports are available on Thomson Reuters 1


Investment Thesis
Earlier when other companies were announcing expansions, Maple leaf on the other hand
prudently focused on effective and effective utilization of its business. We base our
investment case for Maple Leaf Factory Cement (MLCF) on the back of robust demand as a
result of increased urbanization and government spending on infrastructural and CPEC
related projects, escaping production halt over Katas Raj and other environmental issues, 2.3
MT of expansion project at its existing site and addition of 40MW coal fired power plant to
its already cost effective power mix.

Demand is Intact
With increasing population, urbanization and several infrastructural projects, reasonable
growth in construction sector was observed over the last decade. The size of the total
construction sector is PKR 320bn (FY17) and on average it contributes 2.5% to the national
GDP. During current government of PML-N, the size of the contribution has risen sharply with
incumbent’s strong focus towards mega infrastructural projects and hefty government
spending in this regard has led the growth rate of construction to outpace growth rate of
GDP.
Relative GDP to Construction Growth
3.0% 20.0%
2.5% 15.0%
Construction Cont.

10.0%
2.0%

Growth
5.0%
1.5%
0.0%
1.0%
-5.0%
0.5% -10.0%
0.0% -15.0%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Const. contribution to GDP GDP Growth Const. contribution growth

Source: PBS, SBP, ASDA Research

Pakistan also enjoys fair share in the world cement industry of 0.77% and is ranked amongst
top 20 producer which constitutes 87% of global cement industry. China being the single
largest producer covers 57% of world cement industry, followed by India (6%) and USA
(1.7%). However in terms of per capita consumption Saudi Arabia is well ahead (1,683kgs)
closely followed by China (1,581kgs), South Korea (911kgs) and Iran (770kgs) whereas
Pakistan’s consumption is well behind its peers at 140kgs, which implies significant room for
growth.

Since the year 2000 Pakistan cement industry has also grown at a CAGR of 9%, dispatches
which were only 9.62mn MT now stands at 40.32mn MT (FY17). Going forward demand for
cement is to remain upbeat on the back of increased activity in infrastructure and housing
sector. Government and private sector housing scheme, rising urbanization, CPEC related
infrastructural projects, construction of motorways, water reservoirs and various hydel
power projects are the key reasons for increased cement consumptions and with election just
around the corner, we believe demand for cement to remain sturdy during the remainder of
the current fiscal year as only PKR 607bn (60%) is released so far for PSDP as against total
allocated budget of PKR 1,001bn (as of March 30, 2018). Any further release of these funds
will have direct benefit on the cement sector.

ASDA Research Reports are available on Thomson Reuters 2


Maple Leaf Cement Factory (MLCF) is primarily engaged in producing grey cement. Besides
this MLCF company also manufactures white cement and enjoys a healthy market share of
more than 90%. Since white cement sells at a premium of 10%-20%, thereby contributing its
fair share in maintaining highest retention level in the industry.

Another key product is sulphate resistant cement, which is used in the construction of dams
and barrages especially in the areas where there is high sulphur content in the water. In the
back drop of power and water shortage, as per WAPDA a total 21 water dams and hydel
power projects are underway. Out of these, three hydro power projects (Kurram Tangi
Mohmand dam, and Tarbella - fifth extension are expected to complete in the ongoing year
whereas eight other projects are ready for construction including much anticipated mega
dams of Diamer- Bhasha and Dasu. Moreover, 12 additional projects are also on the table for
which detailed feasibility report is being prepared.

Most of these projects are located in North with Kurram Tangi Mohmand and Tarbela dam
(fifth extension) in close proximity to MLCF plant in Iskanderabad. Since MLCF is the fourth
largest player in the cement industry and given its strong brand image, the company in our
view is well-poised to capture demand growth. In the backdrop of above stated scenario, we
believe this will further augment volumetric sales and topline of the company going forward.

Major Hydro Projects within 800 km to MLCF

1) Diamer-Bhasha Dam
2) Kurram Tangi Dam
3) Dasu kohistan Dam
4) Maple Leaf Cement Factory
5) Golen Gol
6) Bunji hydro power
7) Tarbella 5th Extension

Source: Google Maps, WAPDA , ASDA Research

On a conservative basis, these projects are expected to complete over 4 to 15 years assuming
preliminary work to start off by next year though past record suggests delay is highly
probable and same have been incorporated in our estimates. As per our research, on average
58,807mt/km2 of cement in the ratio of 1:2:4 (cement, gravel, mud) is required for hydro
projects which is likely to generate total cement demand of around 8.92 mn MT over the
prescribed period (0.667mn MT/annum).
The grid below illustrates specification of hydel projects in close proximity to MLCF.

Cement Consumption Power Capacity Water Storage


Hydro Projects Distance (km)
(mn MT) (MW) Capacity (MAF)
Kurram Tangi Mohmand 164 0.53 800 1.2
Tarbela 5th Extension 229 0.93 1410 N/A
Dasu Kohistan 507 3.46 4320 11.4
Diamer-Bhasha 588 3.56 4500 8.107
Bunji Hydro power 623 0.45 7100 0.2
Sum 8.92 18130 20.91
Source: WAPDA , ASDA Research

ASDA Research Reports are available on Thomson Reuters 3


KATAS RAJ - Blessing in Disguise
Supreme Court on Katas Raj case has directed all companies located near Katas Raj Temple to
EBITDA Mn seek prior approval before undergoing expansionary projects. Moreover, Mines and Mineral
2022 11714
2021 11388 Department of Punjab (MMDP) also conducted a feasibility report to evaluate impact on
2020 9203 ecology with respect to new addition of cement plants in the Salt Range region. As per
2019 7726 report, MLCF is located in the safe zone plus the company relies on own sources of water
2018 7807 mainly extracted from tube wells situated within the plant while other companies that
2017 9,087 appeared in the negative zone consumed more water than were actually allowed. This has
2016 9,371 resulted in drying of the Katas raj pond. These companies will either have to search for other
2015 7,356 location or cede expansion but in our view all the expansions will eventually come online
2014 6,746 after fullfiling/going through stringent regulations. We believe it is beneficial for MLCF as
2013 6,515 new capacities of 16.4 MT (58%) out of total planned 28.5 MT lies in the Punjab region.
2012 4,438 Furthermore, with the deferral of new plants competition/price war within the region will
0 2000 4000 6000 8000 10000 12000 also ease out and this offers a greater opportunity for MLCF to increase its foot hold in the
Source: Company Accounts, ASDA Research
region.

Brownfield Expansion – Effort to Retain Market Share


Earlier when other companies were announcing expansions, Maple Leaf on the other hand
prudently focused on effective and effective utilization of its business. Following the
expansion spree and to retain its market share, MLCF has also announced a brownfield
expansion project (line-3) of 2.3 MT which is to be build at its existing site at Iskanderabad.
The total capacity of the company will go up to 7.3 MT.

The project is worth PKR 23Bn, financed through 48% of debt and 52% of equity, out of which
19% was raised through issuing 12.5% right shares. Following the foot steps of other major
players in the industry, MLCF has too ordered the new state-of-the-art plant from a Danish
based company, FLS Smidth.

The plant was initially expected to be online by FY19 but the construction was halted over
environmental concerns by EPA which was later over-ruled by Lahore High Court. Once the
Cash Flow case is completely over, we believe the construction will be is in full swing however, we
expect the plant to be operational by FY 1H20 with a delay of 3-5 months, along with a slight
2020 increase in total estimated cost and we have incorporated these assumptions in our model.

2019
The graph below illustrates impact on financial performance following start of commercial
operations of the new plant
CFF

2018 CFI 14000 Margins Growth Trend


CFO
12000
2017 10000
PKR '000

8000
(15) (10) (5) - 5 10 PKR 'mn
6000
Source: Company Accounts, ASDA Research
4000
2000
0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

GP OP PBT PAT

Source: Company Accounts, ASDA Research

ASDA Research Reports are available on Thomson Reuters 4


Strong cost structure to support margins
Despite facing tough competition in the northern region, MLCF has a reasonable capacity and
Market Share dispatches wise market share of 8% and 8.7% and post expansion we anticipate it to reach
7.8% and 9% respectively. We foresee a slight dip in dispatches share in FY19 on the back of
Local Exports
increased competition as expansionary projects becomes operational by other players. This
will dent MLCF’s topline but given the efficient cost structure, usage of alternate fuel, highest
11% retention ratio and ability to fully utilize its existing capacity (1HFY18: 95%), all this in our
8% 8% 9%
9% view will partially off-set decline in profit margins.
7% 8% 8%
As per our study, with every 2-3% increase in the utilization level, the bottom-line will also
have a positive impact of 4% (FY:18) and 5% (FY:19) respectively.
2014 2015 2016 2017
On the exports front, given the geographical location of MLCF, the company mainly exports
to Afghanistan and India but during the period sharp decline of 40% (1HFY18) was observed
Pre-Expansion Market share in the backdrop of influx of cheaper Iranian cement in Afghanistan and 19% non-tariff
Industry North Punjab barriers by India making it exceptionally tough for MLCF to compete with Indian
8% 9.71% 15.72% counterparts. However, MLCF local dispatches grew by 14.8% in IH18 thereby mitigating
volumes of ailing exports. The company needs to hunt for new export avenues in order to
Post-Expansion Market Share maintain current profit margins, failure to do so will seriously hamper its bottom-line.
Industry North Punjab
7.88% 10.18% 14.93% Dispatches vs Capacity Utilization
Source: APCMA , ASDA Research 4.00 100%
95% 95%
95% 88% 90%
3.50
85% 3.61
3.36 80%
3.00 78% 3.34 3.35 77%
3.11 70%
2.96
2.50 2.74 60%
2.00 50%
3.29 40%
1.50 2.93 3.05 2.83
2.74
2.35 30%
1.00 2.18
0.56 0.61 0.60 20%
0.43
0.50 0.27 0.25 0.29
10%
- 0%
2014 2015 2016 2017 2018 2019 2020

Total Dispatches (MT) Local (MT) Exports (MT) Utilization

Source: Company Accounts, ASDA Research

ASDA Research Reports are available on Thomson Reuters 5


Energy Mix is All Set to Get Efficient
With clear lack of planning to counter acute power shortfall, increasing industrialization and
CPP (MW) upward trend in urbanization has further worsen the energy situation within the country. As
a result large scale manufacturing companies are installing captive power plants for
uninterrupted power supply moreover, average cost of electricity generated through these
WHR, 16
plant is comparatively more economic as opposed to power supplied via national grid.
COAL, 40
GAS, 16
Maple Leaf Power (MLPL) is another addition to its already cost effective power mix, which
will further lower its dependence on national grid and thus will eventually make MLCF self-
FO, 24 reliant on captive power plants.

The 40 MW coal fired plant was established through 100% wholly owned subsidiary ‘Maple
Leaf Power Limited’. The plant was imported from Chinese firm ‘Sinoma Energy Conservation
limited’ and is build in vicinity to MLCF Iskanderabad plant over 112 Kanals of land to ensure
smooth and uninterrupted supply of power to parent company via three feeders at 6.3 KV.
Source: Company Accounts, ASDA Research

The plant has a useful life of 25 years and the overall cost of the project is PKR 5.05Bn,
financed through 40% equity and 60% debt and was completed within the estimated time
frame.

As per management, approximately 150,228 ton/annum of imported coal will be used for
power generation which will be supplied via trucks from port to plant location. To recall MLCF
has inked a 5 year agreement with Railway authorities for timely and cost effective
transportation of 360k ton per annum of coal, translating into annual after tax savings of PKR
0.47-1.1 on a per share basis. Since there is no information on this matter, therefore we have
not incorporated cost savings in our model but it is highly probable that the company will
review its contract with the railway authorities as the current coal supply is already in line
with the production level.

The drawback of this plant is the efficiency factor which is 30.08%, well below the average
range of 35%-40%. The plant has already commenced operations and we have incorporated
its impact from 3QFY18. The grid below illustrates after tax impact on EPS, gross and net
margins after incorporating 10% auxiliary consumption.

Power Mix Additional After Tax Impact of Coal Power Plant


Year EPS (PKR) GM NP
3% 0%
2018 0.66 2% 2%
23% 22%
25% 2019 0.97 4% 3%
0% 0% 45%
2020 1.00 3% 3%
28% 33% 23% 2021 0.91 2% 2%
7%
2020 1.22 3% 3%
22% 18% 22% 23% Source: ASDA Research
Power Sources & Utilization
27% 27% 27% 25%
The table on the right shows ratio of captive power used against total generation capacity. As
of 2017 the company generated78% (WHR: 27%, GAS: 18 and FO: 33%) of power through
2016 2017 2018 2019
own sources and remainder was fulfilled via grid. The average cost of power per KWH was
WHR GAS FO COAL GRID PKR 7.9 (2017) and with the commencement of coal fired plant in the ongoing year, as per
our calculation the same cost is expected to decline to PKR 7.25 (FY:18) and PKR 6.20 (FY:19)
Source: Company Accounts, ASDA Research as the cost per unit is the lowest after waste heat recovery plants as evident from the graph
below.

ASDA Research Reports are available on Thomson Reuters 6


Going forward we believe the company will also lower its dependence on FO based captive
plant given its highest cost per unit. It is also pertinent to mention here that the company
may install more WHR as the new plant becomes operational. Our base case does not include
above assumption as there is no concrete information.

Power Cost Per KW (PKR)


18.00 9.00
16.00 7.84 8.04 7.90 8.00
14.00 7.25 7.08 7.00
6.65 6.50
12.00 6.63 6.00
6.18
10.00 5.00
8.00 4.00
6.00 3.00
4.00 2.00
2.00 1.00
- -
2014 2015 2016 2017 2018 2019 2020 2021 2022

WHR Gas FO Coal Grid MLCF Avg Cost

Source: ASDA Research

About the company Shareholding Pattern


The company was first established in collaboration between Directors, CEO And Their
Government of Canada and Pakistan Industrial Corporation in 1956, 0% Spouses & Minor Children
however later in 1992 under privatization scheme it was acquired by
Saigol Group, also the owner of one the largest conglomerates 28% 0% Associated Companies,
Undertakings And Related
‘Kohinoor Maple Leaf Group’. 50%
Parties
0%
NIT And ICP
Maple Leaf Cement Factory is the fourth largest producer and the 1%
15%
single largest production site of cement situated in the upper Punjab 0%
region of district Mianwali. The current production capacity of MLCF is 1% Banks, Development
12,000 TPD and 500 TDP for grey and white cement respectively. 4% Financial Institutions, Non-
Moreover the company also makes different variants like ordinary 0% 0% Banking Financial Institutions
1%
Portland cement, sulphate resistant cement and low alkali cement. 0% Insurance Companies

ASDA Research Reports are available on Thomson Reuters 7


VALUATION
We initiate our coverage with a HOLD stance on the scrip, offering an upside potential of
6.05%. MLCF is currently trading at a trailing (FY: 17) and forward P/E multiple (FY: 18) of
8.43x and 11.73x respectively. The 3 year average $EV/Ton of the stock is $120/Ton.

We have used discounted cash flow method (FCFF) in order to calculate intrinsic worth of the
stock. The target price for June 2018 is valued to be PKR 77.82, offering an upside of 2.68%
from last closing price and assuming 38% of dividend payout ratio in the years to come, this
translates into a dividend yield of 3.37%, thereby offering a total return of 6.05%.

'Mn 2018 2019 2020 2021 2022


CFO 5,726 7,200 6,574 7,518 8,747
FCI (1,585) (2,176) (4,495) (2,211) (2,350)
Int(1-t) 381 522 701 566 436

FCFF 4,522 5,546 2,780 5,874 6,833

Sensitivity Analysis of target price with respect to 6M KIBOR and growth rate
KIBOR
5.0% 5.5% 6.0% 6.5% 7.0% 7.5% 8.0% 8.5% 9.0% 9.5%
2.5% 74.77 74.46 74.15 73.84 73.53 73.23 72.93 72.63 72.33 72.04
3.0% 76.91 76.57 76.24 75.91 75.59 75.26 74.94 74.62 74.31 74.00
GROWTH 3.5% 79.23 78.87 78.51 78.16 77.82 77.47 77.13 76.79 76.45 76.12
RATE 4.0% 81.75 81.37 80.99 80.61 80.24 79.87 79.50 79.14 78.78 78.42
4.5% 84.51 84.1 83.69 83.29 82.89 82.48 82.10 81.71 81.32 80.94
5.0% 87.55 87.1 86.66 86.23 85.79 85.36 84.94 84.52 84.1 83.69
5.5% 90.9 90.42 89.94 89.46 88.99 88.53 88.07 87.61 87.16 86.71
Source: ASDA Research

ASDA Research Reports are available on Thomson Reuters 8


Key Underlying Assumptions
 Using Blumes to method to determine five year adjusted Beta of 1.29.
 Using 10 year PIBs as a proxy for risk free rate of 8.00%
 Terminal growth rate of 3.50%
 Target capital structure of 14% of debt and 86% of equity.
 Risk Premium of 6.80%

FCFF
Discounted Value 19,110.63
Terminal growth rate (Real GDP %) 3.50%
Terminal Value 57,737.40
Discounted terminal value 32,630.20
Weight of debt 14.00%
Weight of equity 86.00%
Interest rate
Kibor 6M (Target) 7.00%
Spread 2.00%
Loan rate 9.00%
Tax rate 30.00%
Cost of Equity 16.81%
Risk Free rate 8.00%
Risk premium 6.80%
Stock Beta 1.295
WACC 15.33%

Total value 51,740.83


Debt 5,541.96
Equity Value 46,198.87
No. of shares outstanding 593.70
Target Price June-18 77.82

ASDA Research Reports are available on Thomson Reuters 9


INVESTMENTS RISKS

 Lower than anticipated demand


 Price war as a result of supply glut
 Unexpected rise in commodity prices
 Further devaluation of PKR
 Decline in infrastructural and CPEC related projects
 Increase in interest rates

Coal Cost to Slump Off

Coal price is expected to slump off over the next decade over global environmental concerns
and availability of cheaper and less toxic sources of power generation. Developed economies
have already started shifting towards renewables and other environment friendly sources of
power generation. On the contrary, as per International Energy Agency (IEA) decline in coal
demand for the next 5-6 years will somewhat be compensated by emerging economies
especially South Asian countries on the back of increased electricity requirement for
production.

Coal Price US/Ton


120.00
100.00
80.00
60.00
40.00
20.00
-
3Q17

2Q21
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17

4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
2Q19
3Q19
4Q19
1Q20
2Q20
3Q20
4Q20
1Q21

3Q21
4Q21
1Q22
2Q22
Source: Bloomberg, ASDA Research

Similar to other players in the industry, MLCF too rely on captive powers for electricity and
coal is the major commodity used for power generation which alone accounts for 40% of
total COGS. In our view MLCF will rely more on coal based captive power going forward
because the cost per KW of producing through coal is the lowest after WHR.

As per our study every 5% change in coal price will also inversely change EPS by 4%, GM by
1% and TP by 3%.

Coal Price US/Ton EPS 2018 Gross Margin TP


-10% 83.12 7.07 36% 82.92
-5% 87.73 6.8 35% 80.37
Base Case 92.35 6.53 34% 77.82
5% 96.97 6.26 34% 75.26
10% 101.6 5.99 33% 72.71

ASDA Research Reports are available on Thomson Reuters 10


Further Devaluation of PKR
Since December’17 with growing concerns over twin deficit and depleting reserves, PKR had
depreciated around 10% against the green back and due to the declining trend in exports
MLCF can no longer enjoy benefit of higher revenues as a result of currency devaluation. The
company recorded only 8.9% of exports for 1HFY18 as against 12.86%, 17.95% and 20.60% for
FY17/16/15.

Devaluation (FY18) PKR/USD EPS (FY18E) GP NP


-19% 124.72 5.64 31% 14%
-14% 119.48 6.08 33% 15%
Base Case -9% 114.24 6.53 34% 16%
-5% 110.05 6.88 36% 17%
As per our study every 5% decrease in PKR will have an inverse impact on EPS of 7.5%

Interest Rate Hike


MLCF will fund its new plant through 40% debt. In this regard the company has already taken
of around PKR 4bn (as of 2QFY18) of loan and going forward PKR 7bn of additional loan will
be drawn for the same purpose and with rupee devaluation acting as a catalyst to bolster
inflationary pressure within the economy, surge in finance cost is expected as interest rates
are likely to march towards north. This can dent MLCF’s bottom-line in the years to come as
major repayments of loan will begin from FY19.

To recall, the company in FY16 has made an early retirement of Sukuk worth PKR 8bn and
likewise can happen given the excellent financial position of the company.

Change KIBOR 3M EPS (FY18E) EPS (FY19E)


-25bps 6.00 6.55 5.89
Base Case 6.25 6.53 5.87
+25 bps 6.50 6.51 5.84
+50 bps 6.75 6.49 5.81
+100 bps 7.25 6.46 5.75
As per above sensitivity every 25 bps increase/decrease in interest rate will alter EPS by PKR
0.02.

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ASSUMPTIONS
2012A 2013A 2014A 2015A 2016A 2017A 2018E 2019E 2020E 2021E 2022E
PKR/USD 89.34 96.82 103 101.43 104.34 104.81 114.24 117.67 118.85 119.44 120.04
KIBOR 3 Months 11.11% 9.88% 9.48% 8.99% 6.51% 6.08% 6.25% 6.50% 6.75% 7.00% 7.25%
Coal Prices USD/Ton 105.66 84.83 77.31 64.15 53.19 74.78 92.35 88.29 82.78 80.2 78.12
MLCF Capacity wise market share 7.90% 7.90% 7.90% 7.73% 7.73% 7.61% 7.20% 6.44% 7.25% 8.45% 8.21%
MLCF Dispatches wise market share 8.15% 8.04% 8.00% 8.36% 8.73% 8.34% 8.00% 7.15% 8.01% 9.34% 9.07%

KEY RATIOS
2012A 2013A 2014A 2015A 2016A 2017A 2018E 2019E 2020E 2021E 2022E
Gross Margin 26% 35% 34% 36% 43% 40% 34% 36% 36% 35% 36%
PAT Margin 3% 19% 15% 17% 21% 20% 16% 16% 16% 16% 17%
Tax Burden 112% 102% 79% 77% 69% 70% 70% 70% 70% 70% 70%
ROA - 2% 10% 9% 11% 14% 11% 7% 6% 7% 9%
ROE - 9% 39% 25% 23% 27% 21% 14% 12% 13% 14%
EBITDA ('mn) 4,438 6,515 6,746 7,356 9,371 9,087 7,807 7,726 9,203 11,388 11,714
BVPS 17.28 22.40 27.74 33.47 40.43 44.88 53.13 54.56 58.80 64.09 69.68
Earnings Yield 18% 28% 18% 8% 9% 8% 10% 9% 10% 12% 13%
Debt to Equity 78% 64% 48% 27% 9% 16% 18% 27% 20% 13% 8%
Debt to Avg Assets - 37% 28% 15% 5% 10% 13% 21% 14% 9% 5%
Liabilities/Avg Assets - 63% 54% 43% 34% 43% 40% 41% 37% 33% 28%
Financial leverage 8.55 4.78 3.27 2.42 1.91 2.00 1.84 1.88 1.80 1.68 1.54
Times interest earned 1.19 2.86 3.45 5.16 17.34 22.58 10.74 7.67 6.79 9.96 13.25

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INCOME STATEMENT (PKR 'mn)
2012A 2013A 2014A 2015A 2016A 2017A 2018E 2019E 2020E 2021E 2022E
Net Sales 15,461 17,357 18,969 20,720 23,433 23,992 23,711 22,139 25,894 31,559 32,083
Cost of Sales 11,447 11,312 12,446 13,224 13,411 14,510 15,537 14,163 16,485 20,371 20,563
Gross Profit 4,015 6,045 6,523 7,496 10,022 9,482 8,175 7,977 9,409 11,188 11,520
Dist Expense 846 798 1,054 1,314 1,360 1,275 1,374 1,316 1,529 1,846 1,906
Admin Expense 258 254 297 381 486 621 549 565 642 753 807
Other Charges 150 167 197 263 660 536 474 443 518 631 642
Other Income 34 41 81 46 36 139 73 68 79 97 98
Finance Cost 2,351 1,705 1,465 1,083 436 318 544 745 1,001 809 623
PBT 444 3,163 3,591 4,501 7,118 6,870 5,306 4,975 5,798 7,246 7,640
Tax (52) (62) 760 1,047 2,233 2,093 1,592 1,492 1,739 2,174 2,292
PAT 392 3,101 2,831 3,454 4,885 4,777 3,714 3,482 4,059 5,072 5,348
EPS 0.94 6.11 5.36 6.55 9.26 9.05 6.53 5.87 6.84 8.54 9.01

BALANCE SHEET (PKR 'mn)


2012A 2013A 2014A 2015A 2016A 2017A 2018E 2019E 2020E 2021E 2022E
Auhtori zed s ha re ca pi ta l 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000
Is s ued 5,806 5,277 5,277 5,277 5,277 5,277 5,937 5,937 5,937 5,937 5,937
Res erves 3,298 2,058 2,058 2,058 2,058 2,058 5,640 5,640 5,640 5,640 5,640
Accumul a ted l os s /profi t (5,275) (565) 2,414 5,576 9,414 12,049 14,351 16,510 19,027 22,172 25,487
Total Equity 3,829 6,771 9,750 12,912 16,750 19,384 25,929 28,088 30,604 33,749 37,065

Long term l oa ns 2,157 1,591 479 38 927 2,890 3,800 7,731 5,214 3,023 1,261
Total non-Current Liabilities 12,996 11,982 10,138 5,414 5,657 7,345 8,064 11,883 9,365 7,167 5,405

Tra de a nd other pa ya bl es 3,727 3,026 3,306 3,164 3,194 3,680 3,928 3,581 4,168 5,150 5,199
Short term borrowi ngs 3,249 3,278 2,619 2,556 1,425 3,138 3,289 1,859 3,541 3,476 2,817
Total Current liabilities 10,604 8,569 7,133 8,144 5,027 7,764 9,470 8,632 10,737 11,328 10,289
Total Equity and Liabilities 32,728 32,373 31,911 31,221 32,022 38,817 47,787 52,926 55,030 56,567 57,082

Property, pl a nt a nd equi pment 26,774 25,630 24,706 23,721 22,822 23,648 30,676 37,723 39,692 38,450 37,220
Long term i nves tment 3 2 2 660 4,670 5,020 4,769 4,531 4,304 4,089
Total Non-Current Assets 26,842 25,690 24,766 23,782 23,544 28,405 35,777 42,574 44,305 42,836 41,391

Stores , s pa re pa rts 3,102 3,751 3,773 4,196 5,384 6,751 7,228 6,589 6,224 7,691 7,763
Stock-i n-tra de 903 939 1,151 1,207 873 1,301 832 758 882 1,090 1,101
Tra de debts 576 758 839 571 577 683 813 171 888 1,082 1,100
Total Current Assets 5,886 6,683 7,145 7,439 8,478 10,412 12,009 10,353 10,725 13,731 15,691
Total Assets 32,728 32,373 31,911 31,221 32,022 38,817 47,787 52,927 55,030 56,567 57,082

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Rating Expected Total Return


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Hold Neither Buy nor Sell
Sell Less than and equal to -5%

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