En Gro Foods Research Analysis

Please refer to the important disclosures and analyst certification on page 2 and the inside back cover of this
document, or on our website www.macquarie.com.au/disclosures.

PAKISTAN

EFOODS PA Outperform
Price (at CLOSE#, 21 May 2012) Rs65.63

12-month target Rs 76.90
Upside/Downside % 17.2
Valuation Rs 76.90
- DCF
GICS sector Food, Beverage
& Tobacco
Market cap Rsm 49,091
30-day avg turnover US$m 4.3
Market cap US$m 538
Number shares on issue m 751.8

Investment fundamentals
Year end 31 Dec 2011A 2012E 2013E 2014E
Revenue m 29,859 42,259 55,713 71,235
EBIT m 2,412 4,113 6,490 8,990
EBIT growth % 159.3 70.5 57.8 38.5
Reported profit m 891 2,004 3,393 5,092
EPS rep Rs 1.19 2.66 4.51 6.77
EPS rep growth % 372.8 124.3 69.3 50.1
PER rep x 55.2 24.6 14.5 9.7
Total DPS Rs 0.00 0.00 0.00 0.00
Total div yield % 0.0 0.0 0.0 0.0
EV/EBITDA x 16.3 10.2 6.6 4.9
Net debt/equity % 76.2 96.6 64.4 33.7
P/BV x 6.8 5.3 3.9 2.8

Source: FactSet, Macquarie Research, May 2012
(all figures in PKR unless noted)
Analyst(s)
Gary Pinge
+852 3922 3557 gary.pinge@macquarie.com
Foundation Securities
Ali Ahmad Tiwana
92 21 5612290-94 ali.tiwana@fs.com.pk

24 May 2012
Macquarie Capital Securities Limited
Engro Foods
Strong growth prospects warrant an
Outperform rating
Initiating with an Outperform rating and PKR76.9 target
We initiate coverage on Engro Foods Limited (Efoods) with an Outperform rating
and DCF-based TP of PKR76.9. The company has a diverse product portfolio
catering to different price segments in a growing industry, its brand equity is
increasing, its margins are increasing and its marketing expenses as a
percentage of sales are falling.
Pakistan was the fourth-largest milk producer in the world as of 2010, with annual
production of around 38bn litres, according to the United Nations Food and
Agriculture Organization. The Ultra High Temperature (UHT) market had a 12%
CAGR over 200511, but the processed milk industry still only comprises 8% of
the tradable milk market in Pakistan. Increasing modernization, rapid
urbanization, rising income levels, changing lifestyles and living standards,
convenience, and health and hygiene concerns are the key drivers for growth of
this segment.
Efoods began in CY06, and in the short time since has achieved clear leadership
in the Pakistan UHT industry, with a market share of 44% at the end of 2011. It
has launched an array of new products such as ice cream and flavoured milk
which have significant growth potential. We expect Efoods to report strong
earnings growth in CY12 and beyond, as the company taps into the 92% loose
milk market and ventures into other high-margin products.
Product portfolio caters to different segments
Efoods operates multiple brands that cater to different price segments. Going
forward, the company looks set to continue its strategy of increasing volume
sales in the liquid dairy segment (through Dairy Omung and Tarang) while
keeping unit margins stable. Its focus in the ice cream segment is on improving
both volumes and margins. By spending heavily on brand-building, the company
has been able to make inroads in key packaged dairy products that were
previously dominated by global companies such as Nestl and Unilever.
Multiples likely to remain high
The FMCG sector in general, and Nestl and Unilever in particular, trades at high
multiples due to robust growth prospects and low free float. We do not expect
Efoods to be any different, as a solid five-year estimated earnings CAGR of 59%
and low free float (11%) should keep multiples high. We do not expect intense
competition from Nestl, as it intends to focus on the powdered milk market going
forward, while Efoods will focus on the liquid milk business.
Risks to our view
We see the following risks to our investment case:
Any levy of VAT/RGST may negatively impact both volumes and margins in
the processed milk segment of the business.
Rising competition from Nestl or the possibility of new entrants remains a
risk, given the high return prospects of the sector.
Macquarie Research Engro Foods
24 May 2012 2
Inside

Investment summary 3
Valuation: Target price PKR76.9 6
Key segments 11
Comparison of key ratios 18
Risks 19
Appendix 1: Direct competition b/w
Nestl and Efoods 20
Appendix 2: Pervasive network 21

EFOODS PA rel Pakistan KSE 100
Share performance

Source: FactSet, Macquarie Research, May 2012
(all figures in PKR unless noted)

Engro Foods
Company profile
Engro Foods started in CY06. Its principal activity is to produce, process and
sell dairy and other food products. Efoods has established plants at Sukkur and
Sahiwal for processing and selling branded UHT milk. It has a powdered milk
plant in Sukkur (with an annual capacity of 5,000 tons) and another is being built
in Sahiwal (with an annual capacity of 10,000 tons). It has an ice cream
manufacturing facility in Sahiwal, which has an annual capacity of 36m litres. It
also has a fruit juice plant, a dairy farm and more than 916 milk-collection
centres spread across the provinces of Punjab and Sindh. Efoods has attained
clear market leadership in the Pakistan UHT industry, with a share of 44% at the
end of 2011. It has launched multiple new products, including ice cream,
flavoured milk, fruit juices and milk powders that show significant potential. As
part of its growth strategy, Efoods is looking to become a diversified food
company with a complete range of products in all major segments, from
confectionary to culinary, infant foods and ready-to-cook meals. Efoods intends
to become the premier food company in Pakistan.
The group
Engro Corporation (Engro), which owns 89% of Efoods, is a publicly listed
company and its shares are quoted on all three Pakistani stock exchanges.
Engro is a diversified conglomerate with interests in fertilizer, foods, PVC resin
manufacturing, energy and petrochemicals. It has also set up joint ventures in
the chemical terminal and energy businesses. Engro has over 3,200 employees
and is one of the largest investors in Pakistan, having invested US$1.7bn over
the past five years.
Shareholding structure
Engro Foods Limited currently has 752m shares outstanding, 89% of which are
held by Engro Corp. It is listed on all the Pakistani stock exchanges. Engro
offered 27m shares to the public and institutional investors through an offer-for-
sale arrangement in CY11, at the time of listing. Efoods had earlier sold 48m
shares through a private placement to fund different projects prior to its listing.
Fig 1 Shareholding structure
Source: Company Data, Macquarie Research, FS Research, May 2012
Auditors
The companys auditors are Messrs AF Ferguson & Co, a member firm of
PricewaterhouseCoopers, generally considered among Pakistans top auditing
firms.
Individual
2%
Others
1%
Engro Corp.
89%
Financial Institution
8%
s
s
24 May 2012 3
Ambiant UHT
5%
Powders
3%
"The
Opportunity"(u
nbranded)
92%
Investment summary
We initiate coverage on Efoods with an Outperform rating and a DCF based TP of PKR76.9,
representing 17% upside potential.
We rate Efoods Outperform due to its diverse product portfolio catering to different price
segments in a growing industry, its increasing brand equity, its increasing margins and its
falling marketing expenses as a percentage of sales.
As of 2010, Pakistan stands as the 4th largest milk producing country in the world, with
annual production of around 38bn litres, according to the United Nations Food and Agriculture
Organization (FAO). Of this amount, tradable milk (production less wastage and farmer
consumption) is around 21bn litres. According to recent TetraPak research, 64% of Pakistans
population is classified as being at the bottom of the economic income pyramid (see Figure
16), which represents 60% of total litres per day of consumption. The agriculture sector
contributes 21% of the countrys total GDP and dairy accounts for over 28% of the total
agriculture sector by value. The Ultra High Temperature (UHT) market grew at a CAGR of
12% during 200611, but the processed milk industry still comprises only 8% of the tradable
milk market. Increasing modernization, rapid urbanization, rising income levels, changing
lifestyles and living standards, convenience, and health and hygiene concerns are the key
drivers for growth in this segment.
Engro Group made the decision to move into this business, through Efoods, because it is
where Pakistan has a competitive advantage. Pakistans large milk resource base provides
ample opportunity for Efoods to add value to unprocessed milk while catering to the needs of
the growing urban economy that requires the convenience of processed and packaged milk.
By spending heavily on brand-building, the company has been able to make inroads into key
packaged dairy products that were previously dominated by global companies such as Nestl
and Unilever.
Fig 2 UHT milk in Pakistan has grown at a five-year
CAGR of 12%
Fig 3 Loose milk is the real opportunity in Pakistan
(2011)

Source: Company Data, Macquarie Research, FS Research, May 2012 Source: Company Data, Macquarie Research, FS Research, May 2012
Efoods only began in CY06, but has already achieved market leadership in the UHT industry,
with a share of 44% at the end of 2011.
It has launched multiple new products, including ice cream and flavoured milk, which have
significant growth potential. We expect Efoods to report strong earnings growth in CY12 and
beyond, as the company taps into the loose milk market, which comprises 92% of the
tradable milk market in Pakistan and ventures into other high-margin products.
In order to fund the increasing demand for liquid dairy and forays into new business ventures,
Efoods plans to invest PKR8.7bn during CY12. Of that, PKR5bn will be invested to boost its
liquid dairy segment capacity and PKR2bn will be spent on a powdered milk plant which is
scheduled to come online during 1HCY13. The companys management said that PKR5bn of
this PKR8.7bn capex would be financed using bank loans, and the remainder through internal
cash flow.
-
100
200
300
400
500
600
700
800
900
1,000
CY06 CY07 CY08 CY09 CY10 CY11
mn litres
Tradable milk: milk
production less
wastage and
farmers
consumption.
Loose milk:
Tradable milk that is
not processed

Despite double-digit
growth over the past
five years,
processed milk still
accounts for only
8% of tradable milk
24 May 2012 4
Taking on the global heavyweights
It is not easy for a local company to capture market share from the worlds leading FMCGs,
which have been present in Pakistan for decades. However, in six short years Efoods has
managed to create wide awareness of its brands and has established significant brand equity.
Efoods has captured the leading position in the UHT milk segment in the country (where it
competes with Nestl) with a 44% market share. In the ice cream segment (which it entered
in CY09 and where it competes with Unilever) it has increased its market share to 24%, and
is in second position. It has scope to increase its share of the ice cream market, as it is
present in only 40% of the locations in Pakistan where Unilevers Walls has a presence. In
terms of business model, Nestl is Efoods only direct competitor. However, Nestls
increasing focus on powdered milk, where it is dominant, represents a growth opportunity for
Efoods in the liquid dairy business in our view.
Fig 4 Revenue comparison Fig 5 Improvement in EBITDA

Source: Company data, Macquarie Research, FS Research, May 2012 Source: Company data, Macquarie Research, May 2012
During 200611, Efoods saw a sales CAGR of 82%. In terms of sustainability, Efoods has
diversified its sales according to customers and geographical locations. Tarang, Olpers and
Omore are Efoods top selling brands; Tarang is a liquid tea whitener, Olpers is UHT milk and
Omore is ice cream, and they all have been growing strongly. The company is continuously
adding new products to the portfolio.
Are the competitors waking up?
Nestl recently revealed planned capex of PKR14bn for CY12. However, we believe this
massive investment will not pose a significant threat to Efoods, as Nestl is primarily targeting
the powdered milk segment of the market, while Efoods focus is on the liquid milk segment.
Industry volumes are seeing double-digit growth, and loose milk prices are also rising
steadily, so we do not see any reason for there to be a price war.
Engro has performed well since IPO
Efoods stock has performed exceedingly well since its debut in 3QCY11, but the price surge
has occurred mainly in CY12. We believe that this is due to better-than-expected profitability
which started from 4QCY11 that led to a surge in share price, followed by strong 1QCY12
results.
Given the rise in share price, we think it is possible that the parent company Engro will sell
some of its stake in Efoods, as it has a cash flow issue at one of its subsidiaries (Engro
Fertilizer Limited). We believe that any such offering would likely be a strategic stake sale,
though management has denied any such intention.

-
10
20
30
40
50
60
70
2007 2008 2009 2010 2011
Nestle Unilever EFOODS
PKR bn
(2)
-
2
4
6
8
10
12
2007 2008 2009 2010 2011
Nestle Unilever EFOODS
PKR bn
We believe that
Nestl will continue
to focus on the
powdered dairy
business, while
Efoods focus is on
the liquid dairy
business
Further offer for sale
by parent company
is probable given
the impressive
performance of the
stock
24 May 2012 5
0.16
0.13
0.25
0.64 0.65
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
1QCY11 2QCY11 3QCY11 4QCY11 1QCY12
PKR /share
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EFOODS KSE
Fig 6 Share price has outperformed KSE Fig 7 Quarterly EPS has also improved

Source: Karachi Stock Exchange, Macquarie Research, FS Research,
May 2012

Source: Company data, Macquarie Research, FS Research, May 2012

24 May 2012 6
Valuation: Target price PKR76.9
We have valued the stock using a Discounted Cash flow (DCF) Model. Though we have also
used other valuation techniques such as market-based PER and market-based PBR, we
prefer the DCF model because it incorporates future cash flows rather than just a one-year
view. We have used a risk free rate of 12.5%, beta of 1.0 and an equity risk premium of 6%,
leading to cost of equity of 18.5%, in our model.
Rather than forecasting cash flows for the next 5 years, we have extended explicit forecasts
to CY20, as in our model we have assumed two distinct growth periods: 1) a high growth
period and 2) a relatively stable growth period. The stock at the current price offers upside
potential of 17% to our DCF based target price of PKR76.9/share. We expect robust earnings
growth to continue, and project PAT to increase at a 5-year CAGR of 59% during CY2011-16,
which is the highest in our Foundation Securities universe in Pakistan. We initiate our
coverage with an Outperform rating.
Fig 8 Value of PKR76.9/share based on DCF model
PKR mn CY12 CY13 CY14 CY15 CY16 CY17 CY18 CY19 CY20
Net income 2,004 3,393 5,092 7,388 8,976 11,294 13,860 16,187 18,617
Amortization & Depreciation 1,265 1,826 2,232 2,618 2,975 3,308 3,638 4,002 4,403
Interest expense 677 821 738 589 315 113 36 - -
Capex (8,700) (4,925) (4,925) (4,432) (4,011) (3,823) (4,205) (4,626) (5,088)
Working capital changes (166) 274 (593) (315) (156) (156) (434) (302) (287)
Free Cash Flow to Firm (4,920) 1,389 2,544 5,847 8,098 10,735 12,895 15,261 17,644

Discounted cashflows (4,920) 1,191 1,866 3,613 4,177 4,640 4,657 4,652 4,538

PV of cash flows 24,414
Discounted terminal value 38,488
Firm value 62,901
Cash 1,645
Debt 6,721
Equity value 57,825
Shares outstanding 752
Value per share 76.9
Source: Macquarie Research, FS Research, May 2012
Valuation based on peer comparison with FMCG sector
To look at Efoods from another valuation approach, we have compared its multiples with
those of the rest of the FMCG sector in Pakistan, though we stick to our DCF-based value for
our investment thesis. Since the forward multiple data of the different companies is not
available, we have used trailing multiples (CY11 data) to arrive at the multiple based
valuations.
We have taken the top nine companies (including Efoods) as a proxy of the entire FMCG
sector in Pakistan. Rather than taking only Nestl and Unilever (the closest competitors of
Efoods), we have used the broad FMCG sector since the aforementioned shares are trading
at extremely high premiums and are thinly traded. We have determined a peer-based value
based on the average of peer valuation measures which include EV/EBITDA, P/E, EV/Sales
and P/Book Value. The highest value of Efoods comes to PKR99.7/share based on P/Sales,
while the lowest value is PKR72.1/share based on a P/E comparison. Using the arithmetic
average of all measures, we arrive at a value of PKR90.6/share.

24 May 2012 7
Fig 9 Valuation based on peer comparison with FMCG sector, CY2011
PKR mn Sales Net Profit Equity EV EBITDA Mkt Cap PE PB P/Sales EV/Sales EV/EBITDA
Nestl 64,824 4,668 7,303 192,497 10,076 180,401 38.64 24.70 2.78 2.97 19.10
Unilever 51,876 4,094 5,416 93,725 6,697 94,387 23.05 17.43 1.82 1.81 14.00
Rafhan 18,271 2,034 5,833 26,048 3,572 26,111 12.84 4.48 1.43 1.43 7.29
Colgate 14,150 1,167 4,374 33,894 2,085 34,513 29.56 7.89 2.44 2.40 16.25
Shezan 4,222 141 944 1,277 277 1,160 8.25 1.23 0.27 0.30 4.62
EFOODS 29,859 891 7,237 54,041 3,375 49,354 55.39 6.82 1.65 1.81 16.01
UnileverFoods 4,940 617 405 18,474 904 18,473 29.95 45.57 3.74 3.74 20.44
Ismail 9,087 306 2,033 8,898 1,167 4,393 14.37 2.16 0.48 0.98 7.63
National 5,521 231 923 8,112 569 7,228 31.35 7.83 1.31 1.47 14.25
Total 202,751 14,148 34,467 436,965 28,722 416,019 27.05 13.12 1.77 1.88 13.29
EV/EBITDA based valuation EV/Sales based valuation
Sector EV/EBITDA 13.3 Sector EV/Sales 1.9
EFL CY12 EBITDA 5,378 EFL CY12 Sales 42,259
EV 71,452 EV 79,341
Debt 6,331 Debt 6,331
Cash 352 Cash 352
Equity 65,472 Equity 73,362
Target price 87.1 Target price 97.6
P/E based valuation P/B based valuation
Sector P/E 27.0 Sector P/B 13.1
EFL CY12 earnings 2,004 Last book value 5,128
Price 54,193 Price 67,305
Target price 72.1 Target price 89.5
P/Sales based valuation Average
Sector P/Sales
1.8
EV/EBITDA
87.1
EFL CY12 Sales 42,259 EV/Sales 97.6
Price 74,799 P/E 72.1
Target price 99.5 P/B 89.5
P/Sales 99.5
Average 89.1
Source: Company data, Macquarie Research, May 2012. Prices as of 21 May
Efoods operating in high growth consumer segment
Efoods is operating in one of the fastest growing and most lucrative segments of the
economy, as the countrys FMCG sector has witnessed very strong growth over the last five
years. The top nine FMCG companies in Pakistan have posted a 5-year average growth of
26% in revenue over this period. During the past five years, gross margins have remained in
the vicinity of 27% to 31%, highlighting that they are largely intact and stable, while sector
ROE averaged over 37%, indicating high return prospects for Efoods.
Fig 10 Sectors robust revenue growth and stable margins
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
2007 2008 2009 2010 2011
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
Revenue growth (LHS) Gross margin(RHS) EBITDA margin(RHS)
24 May 2012 8
Dairy Omung the game changer
After achieving the lead position in the premium UHT milk segment in Pakistan with a market
share of 44%, the company is now taking on the loose milk segment, which comprises 92% of
the total tradable milk market, with the recent launch of Dairy Omung. In our opinion this
product is a game changer, as it is priced 12% below the average loose milk price, which is
unheard of in the packaged milk industry. This product is meant to cater to the lower income
class, which represents the majority of Pakistani people, and to accelerate the conversion to
powdered milk from regular milk. Though margins for Dairy Omung are slightly lower than for
normal packaged milk, the company aims to see strong volume growth, which it expects will
offset the margin effect.
According to a recent TetraPak study, 64% of the countrys population is classified as being in
the bottom segment of the economic pyramid (see Figure 16), and consumes 60% of the total
liters of milk consumed per day in Pakistan. The company expects Dairy Omung to
successfully capitalise on this immense opportunity.
This lower priced product should also help the company to target rural areas of KP (Khyber
Pakhtunkhwa) and Baluchistan where, unlike in Punjab and Sindh provinces, people do not
keep cows. The companys strategy is to simply achieve cost leadership in this segment of
the market and further increase the penetration of packaged milk. Cost leadership would
likely prove a strong entry barrier for any new potential new entrants.
We expect the growth story to continue as the company focuses on capacity enhancement.
Efoods plans to invest PKR8.7bn during CY12, most of which (PKR5bn) would be invested in
increasing its liquid dairy products capacity, while PKR2bn would be invested in a powdered
milk plant. Efoods also plans to add 300+ milk collection centers during 2012, bringing its total
to over 1,200 by end-CY12.
Strong growth in revenues; signifying the potential
Over the last five years, Efoods revenues have registered stellar growth of 72%, primarily
because of the dairy and juices (DJ) segment. DJ revenue, where liquid dairy products have
an 88% share, grew at 5-year CAGR of 79%, and contributed 90% of the companys overall
revenue during CY11. Ice cream segment revenue has posted growth of 87% since its launch
in 2009 and its contribution to overall revenues stood at 10% during CY11. At its latest
analyst briefing, management mentioned that it is temporarily withdrawing from juices and will
be re-launching its juices with a revised strategy and rebranding. Though, it has not
mentioned a timeframe for this, we believe this will not affect company revenues as its
contribution to overall sales was just under 1% during CY11.
Fig 11 Liquid dairy holds the major chunk of
revenue, CY11

Fig 12 Rising Efoods volumes generating robust
revenue growth


Liquid dairy
88%
Powder
1%
Juices
1%
Ice cream
10%
-
10
20
30
40
50
60
70
80
CY06 CY08 CY10 CY12E CY14E
-
100
200
300
400
500
600
700
800
Revenue Volumes
mn Litres PKR bn
24 May 2012 9
Mounting margins expected to match industry levels by CY13
Just like any other FMCG, Efoods initially invested heavily to create a strong brand name,
establishing differentiation to penetrate the market, which was previously dominated by well-
established players like Nestl. These strategies entail a high level of investment and
marketing expenditure, which initially squeeze margins. However, we believe Efoods now has
well-established brands and has attained sufficient volumes (achieving economies of scale).
Marketing expense as a percentage of sales has declined significantly from 23% in CY06 to
6% in CY11 due to rising revenue and stabilizing marketing expenditure. Consequently,
margins have started improving and are likely to match the industry margins by CY13.
Fig 13 Efoods EBITDA margin approaching that of the industry
Efoods EBITDA margin has improved significantly from 8% in CY10 to 12% in CY11, which is
close to the industrys 14%. Due to effective product mix strategies, the companys
contribution margin has also seen consistent growth over the last five years, improving to
25% in CY11 from 16% in CY07. With its focus on improving margins in the ice cream
business and forays into the high margin powdered segment, Efoods is likely to witness
further margin improvement going forward in our view.
Fig 14 Consistent decline in Marketing/Sales ratio Fig 15 Improving margins of Efoods


-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
CY08 CY09 CY10 CY11
Sectors' EBITDA margin EFOODS' EBITDA margin
0%
5%
10%
15%
20%
25%
CY06 CY07 CY08 CY09 CY10 CY11 CY12E CY13E CY14E
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
CY07 CY08 CY09 CY10 CY11 CY12E CY13E CY14E
Contribution margin Gross margin EBITDA margin
24 May 2012 10
Product portfolio covers all market segments
Efoods operates multiple brands, such as Olpers milk, Dairy Omung, Olpers Light, Tarrka,
Omore, Olpers flavored milk, Tarang dobala, Olpers cream, and Tarang tea whitener that
cater to different price segments. With so many product variants, Efoods is targeting every
consumer segment of the economic pyramid. As a result, the company has positioned itself to
benefit from the changing demographics of Pakistan.
Fig 16 Efoods products covering the entire economic pyramid
Clear segmentation strategy helps indentify new buyers
Efoods has witnessed robust growth since it started its operations, as evidenced by its market
leadership in the packaged liquid milk business in Pakistan and it having the second highest
share in the ice cream segment. We believe this was achieved only through its clear strategy
and successful segmentation of the market. Segmentation, which is based on age,
demography and income class, etc, has also helped the company to identify and target those
segments which have mostly remained underserved or even unexplored.
This strategy can be witnessed in the launch of lower priced product Dairy Omung, which is
priced 11-12% below the average loose milk sold (in most urban cities) and is catering to the
masses (lower income class) in the country. No other dairy company has targeted this
segment before. Likewise, Efoods also launched Tarang to capitalize on the high level of tea
drinking with milk in Pakistan, accounting for 32% of all milk consumption in the country,
according to a Tetra Pak study of May 2012. Moreover, Pakistan is the second largest
creamed tea market in the world (as per Nestls Annual Report). We believe this is why
Tarang has witnessed enormous growth in volumes over the last couple of years and this is
likely to continue as no other dairy manufacturer is targeting the tea market (liquid tea
whitener) in Pakistan. Efoods is also enjoying high margins on this product as it is a vegetable
oil-based product that is a cheaper source of fat. Additionally, unlike Tarang powder which is
aimed at the masses, Nestls Everday Powder, although also targeting the tea segment, is
aimed at the upper segment of the market. Efoods also launched flavored milk before Nestl.

Olwell Milk
Owsum
Flavored milk
Olf rute
Omore
premium dairy
ice cream
Olpers cream
Tarang Olpers milk
Tarrka Omore ice
cream
Dairy Omung Tarang
Dobala
Ice lollies
Efoods is enjoying
considerably higher
margins on Tarang
24 May 2012 11
Key segments
Dairy segment
The DJ segment comprises liquid dairy products and juices. Juices and powder contribute
only 2% of the segments revenue as of CY 2011, while the remainder comes from liquid
dairy products.
The DJ segments revenue grew at a 5-year CAGR of 79% during CY06-11. Tarang remained
the major reason for the healthy growth as this product contributes more than 50% of the
segments revenue. According to Efoods, it is currently the market leader in the liquid dairy
segment with 44%, followed by Nestl, which we estimate has a 35% share. With Nestls
increasing focus on powdered milk, and Efoods rising penetration of lower priced Dairy
Omung, Efoods management looks set to further raise its market share.
Fig 17 Market share rises to 44% in CY11 from 24% in CY08
Rising DJ segment margin drawing near Nestls
The dairy and juices segment is really a star segment of Efoods, as during CY11 it
contributed 161% of the companys overall bottom line. The DJ segment has shown strong
margin improvement with a CY11 EBITDA margin of 13% compared with 10% and 6% in
CY10 and CY09, respectively. Rising volumes (economies of scale), contained marketing
expenses and improving efficiencies remain the major reasons for this strong improvement in
EBITDA margin. However, it still lags that of Nestl, as the latter derives around 60% of its
revenues from the powdered segment, which is highly lucrative in term of margins.
Efoods strategy is to maintain the contribution margin and gain profitability through rising
volumes and by containing marketing expenditure. With volumes growing, the companys
increasing focus on improving the product mix, and its forays into the high margin powdered
milk segment, we expect the segments margin to improve further and match Nestls current
margin level of 15% in the next two years.
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
CY08 CY09 CY10 CY11
0
50
100
150
200
250
300
350
400
450
Volumes Market share
24 May 2012 12
Fig 18 Narrowing gap between Nestl and Efoods
margins

Fig 19 Mounting DJ segment EBITDA of Efoods

Margin subject to seasonal fluctuation
Milk production during a year varies with climate and season. Milk property is classified into
two seasons: 1) Flush (September to April), and 2) Lean (May to August). During the lean
period, milk production decreases to 55% of flush volumes. Thus, during this period, milk
supply is met through imported powdered milk and excess milk stored during the flush period,
most of which is converted to skimmed powdered milk and reconstituted during the lean
period. This is the reason why Efoods inventory level rises during 2Q and 3Q and dips
sharply during 4Q when the milk supply improves. During the lean period, due to the short
milk supply, milk prices generally go up (farmers have the pricing power); however, packaged
dairy product prices increase with a lag. This is the reason why margins contract during 2Q
(which coincides with the lean period). 3Q margins are now comparatively better than 2Q, as
this quarter also happens to currently coincide with the month of Ramadan when demand is
generally higher and milk production begins to improve. Higher product prices also play a part
during 3Q and 4Q, resulting in fatter margins.
Fig 20 Inventory level peaks during 2Q Fig 21 Margin varies owing to seasonal factors


12%
18%
15%
15%
-3%
6%
10%
13%
-5%
0%
5%
10%
15%
20%
CY08 CY09 CY10 CY11
Nestle's DJ segment EBITDA Margin Efoods' DJ segment EBITDA Margin
(1,000)
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
2008 2009 2010 2011 2012E 2013E
PKR mn
-
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
Jun Sept Dec
PKR bn
Higher
inventory level
during lean
period
0%
5%
10%
15%
20%
25%
30%
1QCY11 2QCY11 3QCY11 4QCY11
46.00
48.00
50.00
52.00
54.00
56.00
58.00
Gross Margin Milk Price
PKR/Litre
24 May 2012 13
58%
24%
21%
Unilever (Wall's) Efoods (Omore) Unorganised brands
Ice cream segment
Ice cream consumption in Pakistan is around 92mn liters annually, of which 78% is the
branded market and the remaining 22% unbranded. Unilevers Walls is the market leader in
this segment. This is an attractive segment as 40% of Pakistan population is under the age of
15, clearly highlighting the potential in Pakistan. Efoods ice cream segment has also shown
robust growth since its launch in 2009. Revenue has grown at a 2 year CAGR of 87%, while
volumes have grown at a 2 year CAGR of 69%. In a short time span, the company has
achieved the number two position with market share of 24%. We believe this is a significant
achievement given it has a presence in just 40% of Walls geographical locations in Pakistan.
To increase its geographical presence, the company has planned capex of around PKR700-
800mn during CY12. Increased power outages and a prolonged winter somewhat hit this
segments growth during CY11. However, due to an expected increase in its geographical
presence during CY12 and likely improvement in load shedding as the election year
approaches, the ice cream segment should perform better during CY12.

Fig 22 Growth in Omore outpacing competitors
Fig 23 Efoods the second biggest player in Pakistan,
CY2011

Focus shifting towards margin improvement
During CY11, the ice cream segment posted negative EBITDA of PKR22mn, compared with
negative EBITDA of PKR236mn in CY10. This improvement is mainly attributable to rising
volumes and reduction in the marketing expense to sales ratio. In contrast to Walls, which
makes frozen dessert, Efoods is currently manufacturing ice cream. Ice cream is classified by
the amount of milk fat it has. Generally, ice creams contain at least 10% percent milk fat and
6% percent non-fat milk solids. Any similar product with lower ratios of the aforementioned
content is classified as frozen dessert. Ice creams are more complicated and expensive to
make, while frozen desserts are cheaper, easier and faster to produce. As per management,
the company plans to shift all of its current ice cream to frozen dessert; in fact this has
already started. Efoods overall strategy is to increase the EBITDA margin and sales volume.
An increase in volumes should also translate into higher growth in the bottom line as it would
dilute the per unit fixed cost (mainly depreciation and financial charges). Therefore, ice cream
segment margins are likely to improve significantly once the company shifts to frozen dessert.
Efoods is also focusing on water lollies in the ice cream segment, targeting kids and teens, a
market that has significant potential as 40% of Pakistans population is under the age of 15.
Moreover, water lollies enjoy strong margins in the ice cream segment.

-
5
10
15
20
25
30
35
40
45
50
CY09 CY10 CY11
Efoods (Omore) Unilever (Wall's)
mn litres
24 May 2012 14
Fig 24 Unilevers Walls EBITDA margin Fig 25 Efoods ice cream EBITDA margin

Vulnerable to high seasonal fluctuation
The ice cream industry has an extremely volatile seasonal pattern with demand peaking in
the summer months and tailing off very sharply in the winter months. During the 4 winter
months (Nov-Feb) in Pakistan, average sales volume drops to 10% of sales in the peak
season. Ice cream production capacity is built to meet peak demand in summer, thus
resulting in underutilization of fixed assets during winter and consequently squeezing margins
during winter.
Fig 26 Revenue and margin tilted towards 2Q and 3Q

0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
2007 2008 2009 2010 2011
-65%
-15%
-1%
8%
13%
-70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
2009 2010 2011 2012E 2013E
438
933
798
383
(128)
(77)
(80)
(120)
0
100
200
300
400
500
600
700
800
900
1000
1QCY11 2QCY11 3QCY11 4QCY11
(140)
(120)
(100)
(80)
(60)
(40)
(20)
-
Revenue PAT
PKR mn PKR mn
24 May 2012 15
Dairy farm; further strengthening backward integration
Efoods established its own dairy farm in 2008. The farm covers an area of 557 acres (220
acres owned, 337 acres leased) which is sufficient to house 10,000 animals. The land is also
used to grow fodder for the animals. As part of the company strategy, Efoods imported cows
for its dairy farm as opposed to using local breeds. Efoods dairy farm currently houses 3,204
animals and is producing around 27,000 liters of milk per day. The company undertook this
strategy as the milk yield of imported cows is higher (more than 20 liters/ day) compared with
the national average of 6-8 liters per day for local breeds. At present, the dairy farm milk is
sold to Efoods at market prices and it meets around 3% of the companys total milk
requirements. The remaining 97% of milk is being supplied through 916+ milk collection
centers and independent contractors/Dhodhis.
Efoods dairy farm is running at a small loss owing to lower yields and low utilization of farm
housing capacity. Efoods is primarily focusing on increasing the number of milk collection
centers rather than increasing its herd size through animal acquisition.
Fig 27 Efoods - Increasing herd size Fig 28 Dairy farm EBITDA a tiny drag on bottom line

Venturing into international Halal foods market
Efoods has entered into the international market with the setting up of Global Business Unit
in North America in early 2011, with ENGRO acquiring Al-Safa (at a price of US$5mn), the
oldest Halal meat brand in North America. It holds a 15% and 3% market share in Canada
and the USA respectively.
The total size of global Halal food industry is US$632 billion, of which the global Halal meat
industry share is 40%, which translates to US$253 billion. The opportunity for growth in North
America is immense as only 5% of the total market is branded and the remaining 95% of the
market unbranded. Moreover, as per management, conversion from unbranded to branded
products is taking place at a very fast pace as consumers are moving towards the organized
sector (modern retail chains) and are looking for convenience. This is why the company has
targeted revenue of US$15mn in CY12, which is 3 times the CY11 revenue. Al-Safa products
are now available in Metro, Wal-Mart, Sobeys, Price Chopper, Nofrills, Maxis, FoodBasics,
Fortinos and Loblaws and the company is in discussions with other major chains to increase
its geographical presence.
Due to a regulation of State Bank of Pakistan, Al-Safa, though managed by Efoods, is
currently a subsidiary of Engro Corporation. As per SBP conditions, Efoods has to show three
years of profitability before Al-Safa can be transferred to its books. In line with an
arrangement between Efoods and Engro Corporation, we expect Al-Safa to be transferred to
Efoods books by the end of 2013. However, we have not incorporated this in our model.
-
500
1,000
1,500
2,000
2,500
3,000
3,500
2008 2009 2010 2011
animals
(11)
(103)
(15) (15)
(120)
(100)
(80)
(60)
(40)
(20)
-
2008 2009 2010 2011
PKR mn
24 May 2012 16
Fig 29 Significant growth potential in unbranded Halal meat segment

Fig 30 BCG Matrix
Source: FS Research, May 2012

Tarang Omore Tarang Dobala Dairy powder
Olper's Milk Olfrute Olper's Light Tarang Powder
Dairy Omang Olper's Cream
Olper's Flavored Milk
Tarrka
Cash Cow Dog
High Low
Market share
B
u
s
i
n
e
s
s

S
e
g
m
e
n
t

G
r
o
w
t
h
BCG Matrix
H
i
g
h
Star Question mark
L
o
w
%
"The Opportunity"
Branded
5%
unbranded
95%
24 May 2012 17
Fig 31 SWOT Analysis

1) Strong and well-established brand
2) Experienced sponsor
3) Proactive management
4) Strong distribution network
1) Huge potential in liquid dairy 1) Competing with world class companies
2) Powdered segment
3) Significant growth potential in North
American meat market
2) Risk of price war in ice cream as Wall's
is enjoying higher economies of scale
3) Nestle's huge investment in powdered
segment could prove to be an entry
barrier
4) Due to high return prospects, other
players may try to enter this segment
2) Needs significant investment in
research and development of products,
unlike Nestle which mainly relies on
parent company for research (parent
company product portfolio)
3) Little experience in powdered
segment, which company plans to enter
by 2013
1) Little experience in FMCG sector, as
Nestle has been present in this sector for
the last three decades
SWOT Analysis
Strengths
Weaknesses
Threats Opportunities
24 May 2012 18
Comparison of key ratios
Fig 32 ROA Fig 33 ROE


Fig 34 Interest coverage ratio Fig 35 Operating profit


Fig 36 ROCE

Fig 37 Gross margin

-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
CY09 CY10 CY11 CY12E CY13E CY14E CY15E
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
CY09A CY10A CY11A CY12E CY13E CY14E CY15E
-2
0
2
4
6
8
10
12
14
16
CY09A CY10A CY11A CY12E CY13E CY14E CY15E
(X)
(2)
-
2
4
6
8
10
12
14
CY08A CY09A CY10A CY11A CY12E CY13E CY14E CY15E
PKR bn
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
24 May 2012 19
Risks
Imposition of VAT/RGST: Any levy of VAT/RGST may negatively impact both volumes and
margins in the processed milk segment of the business.
High inflation and interest rates: With inflation and interest rate continuing to remain in
double digit, consumers purchasing power may erode resulting in a decline in company
margins and possibly volumes. High interest rates will also negatively impact profitability as
Efoods is highly leveraged.
High level of investment in powdered milk plant could prove an entry barrier: Unlike the
liquid dairy and ice cream segments, the powder segment is more capital intensive and it
takes more time to build a powder plant. This could prove an entry barrier for the company.
Moreover, the company has little experience in the powder segment so risk of failure is
higher.
Food safety risk: Any food safety and quality related issues could negatively impact the
brand image. However, Efoods has deployed a stringent quality assurance system and meets
all the required quality related certification, which insures that food quality meets world class
standards.
Risk of potential new entrants: Due to the high return prospects of the sector there could
be the risk of potential new entrants into this segment which could dilute the companys
growth. New entrants would however have to spend heavily on a milk collection network and
brand building which is very capital intensive.
Competition from Nestl: Though Nestl currently focuses more on the powdered milk
segment (where it holds a near monopoly), it could ramp up its presence in liquid dairy. The
above could result in a price war, hitting Efoods margins. However, given the
underpenetration of the processed milk industry, we believe there is ample room for both
companies to grow easily.
FTA with India: Possibility of imported products from India may intensify the competition
although we believe the risk is minimal as the huge Indian market still remains underserved.
Continuous investment in research and development requires more cash: In order to
maintain market share and counter competitors, FMCG needs to continuously invest in
product branding, innovation and renovation. This approach is being successfully followed by
Efoods; however, this entails high investment. In contrast to Efoods, Nestl can launch new
products from its parent companys product portfolio, thereby requiring minimal or even no
cash.
24 May 2012 20
Appendix 1: Direct competition b/w Nestl
and Efoods
Fig 38 Direct competition b/w Nestl and Efoods
EFOODS Nestl
Olper's Milk Milk Pak
Olper's Light Nesvita
Tarang
Dairy Omang
Olper's Cream Milk Pak cream
Tarang Dobala

Olper's Flavored Milk Nestl Milk Pak
Nestl's Yogurt
Tarang powder Everyday
GUMP (e.g NIDO)
Cereal
Infant nutrition
Tarrka
Olfrute Fruita Vitals
Nesfruta
Meggi
Water(pure life)
EFOODS Unilever
Omore Walls
Tea
Spreads
Personal Care
Shampoo
Soap
Home care
Knorr

24 May 2012 21
Appendix 2: Pervasive network
Fig 39 Pervasive network

Milk collection centers 916+
Milk vehicles 285
UHT distributors 300
Ice cream distributors 7
5000+ice cream-Direct distribution
Milk collection centers
24 May 2012 22

Engro Foods (EFOODS PA, Outperform, Target Price: Rs76.90)
Interim Results 2H/11A 1H/12E 2H/12E 1H/13E Profit & Loss 2011A 2012E 2013E 2014E

Revenue m 16,416 21,130 21,130 27,857 Revenue m 29,859 42,259 55,713 71,235
Gross Profit m 4,293 5,489 5,489 7,708 Gross Profit m 7,592 10,977 15,417 19,781
Cost of Goods Sold m 12,123 15,641 15,641 20,148 Cost of Goods Sold m 22,267 31,282 40,296 51,454
EBITDA m 2,075 2,689 2,689 4,158 EBITDA m 3,375 5,378 8,316 11,222
Depreciation m 486 632 632 913 Depreciation m 963 1,265 1,826 2,232
Amortisation of Goodwill m 0 0 0 0 Amortisation of Goodwill m 0 0 0 0
Other Amortisation m 0 0 0 0 Other Amortisation m 0 0 0 0
EBIT m 1,589 2,056 2,056 3,245 EBIT m 2,412 4,113 6,490 8,990
Net Interest Income m -559 -521 -521 -632 Net Interest Income m -1,049 -1,041 -1,263 -1,136
Associates m 0 0 0 0 Associates m 0 0 0 0
Exceptionals m 0 0 0 0 Exceptionals m 0 0 0 0
Forex Gains / Losses m 0 0 0 0 Forex Gains / Losses m 0 0 0 0
Other Pre-Tax Income m 0 0 0 0 Other Pre-Tax Income m 0 0 0 0
Pre-Tax Profit m 1,031 1,536 1,536 2,613 Pre-Tax Profit m 1,363 3,072 5,226 7,854
Tax Expense m -356 -534 -534 -917 Tax Expense m -472 -1,068 -1,834 -2,762
Net Profit m 675 1,002 1,002 1,696 Net Profit m 891 2,004 3,393 5,092
Minority Interests m 0 0 0 0 Minority Interests m 0 0 0 0

Reported Earnings m 675 1,002 1,002 1,696 Reported Earnings m 891 2,004 3,393 5,092
Adjusted Earnings m 675 1,002 1,002 1,696 Adjusted Earnings m 891 2,004 3,393 5,092

EPS (rep) 0.90 1.33 1.33 2.26 EPS (rep) 1.19 2.66 4.51 6.77
EPS (adj) 0.90 1.33 1.33 2.26 EPS (adj) 1.19 2.66 4.51 6.77
EPS Growth yoy (adj) % 77.8 360.4 48.5 69.3 EPS Growth (adj) % 372.2 124.6 69.3 50.1
PE (rep) x 19.0 24.6 14.5 9.7
PE (adj) x 19.0 24.6 14.5 9.7

EBITDA Margin % 12.6 12.7 12.7 14.9 Total DPS 0.00 0.00 0.00 0.00
EBIT Margin % 9.7 9.7 9.7 11.6 Total Div Yield % 0.0 0.0 0.0 0.0
Earnings Split % 75.7 50.0 50.0 50.0 Weighted Average Shares m 750 752 752 752
Revenue Growth % 43.8 57.2 28.7 31.8 Period End Shares m 752 752 752 752
EBIT Growth % 77.5 150.1 29.4 57.8

Profit and Loss Ratios 2011A 2012E 2013E 2014E Cashflow Analysis 2011A 2012E 2013E 2014E

Revenue Growth % 42.6 41.5 31.8 27.9 EBITDA m 3,375 5,378 8,316 11,222
EBITDA Growth % 105.3 59.3 54.6 34.9 Tax Paid m -472 -1,068 -1,834 -2,762
EBIT Growth % 159.3 70.5 57.8 38.5 Chgs in Working Cap m -870 4 274 -593
Gross Profit Margin % 25.4 26.0 27.7 27.8 Net Interest Paid m 0 0 0 0
EBITDA Margin % 11.3 12.7 14.9 15.8 Other m -954 -1,549 -1,300 -1,165
EBIT Margin % 8.1 9.7 11.6 12.6 Operating Cashflow m 1,080 2,765 5,456 6,702
Net Profit Margin % 3.0 4.7 6.1 7.1 Acquisitions m 0 0 0 0
Payout Ratio % 0.0 0.0 0.0 0.0 Capex m -3,436 -8,700 -4,925 -4,925
EV/EBITDA x 6.7 10.2 6.6 4.9 Asset Sales m 36 0 0 0
EV/EBIT x 9.3 13.3 8.5 6.1 Other m 64 1,294 0 0
Investing Cashflow m -3,335 -7,406 -4,925 -4,925
Balance Sheet Ratios Dividend (Ordinary) m 0 0 0 0
ROE % 14.4 24.3 31.0 33.5 Equity Raised m 1,264 4 0 0
ROA % 16.6 20.1 24.2 28.2 Debt Movements m 49 4,583 520 -1,238
ROIC % 16.5 21.0 23.2 28.0 Other m 1,160 0 0 0
Net Debt/Equity % 76.2 96.6 64.4 33.7 Financing Cashflow m 2,474 4,587 520 -1,238
Interest Cover x 2.3 3.9 5.1 7.9
Price/Book x 2.3 5.3 3.9 2.8 Net Chg in Cash/Debt m 351 296 1,347 1,886
Book Value per Share 9.6 12.3 16.8 23.6
Free Cashflow m -2,356 -5,935 531 1,777

Balance Sheet 2011A 2012E 2013E 2014E

Cash m 351 296 1,347 1,886
Receivables m 87 59 83 121
Inventories m 2,638 4,145 4,441 6,480
Investments m 0 0 0 0
Fixed Assets m 9,615 17,051 20,149 22,842
Intangibles m 134 134 134 134
Other Assets m 3,814 2,649 3,225 2,935
Total Assets m 16,639 24,333 29,379 34,397
Payables m 2,344 3,785 4,955 6,148
Short Term Debt m 252 300 2,500 3,200
Long Term Debt m 5,610 8,930 6,992 4,667
Provisions m 0 0 0 0
Other Liabilities m 1,196 2,073 2,295 2,652
Total Liabilities m 9,402 15,089 16,742 16,667
Shareholders' Funds m 6,533 8,539 11,931 17,024
Minority Interests m 0 0 0 0
Other m 704 706 706 706
Total S/H Equity m 7,237 9,245 12,637 17,730
Total Liab & S/H Funds m 16,639 24,333 29,379 34,397

All figures in PKR unless noted.
Source: Company data, Macquarie Research, May 2012

24 May 2012 23
Important disclosures:
Recommendation definitions
Macquarie - Australia/New Zealand
Outperform return >3% in excess of benchmark return
Neutral return within 3% of benchmark return
Underperform return >3% below benchmark return

Benchmark return is determined by long term nominal
GDP growth plus 12 month forward market dividend
yield
Macquarie Asia/Europe
Outperform expected return >+10%
Neutral expected return from -10% to +10%
Underperform expected return <-10%
Macquarie First South - South Africa
Outperform expected return >+10%
Neutral expected return from -10% to +10%
Underperform expected return <-10%
Macquarie - Canada
Outperform return >5% in excess of benchmark return
Neutral return within 5% of benchmark return
Underperform return >5% below benchmark return
Macquarie - USA
Outperform (Buy) return >5% in excess of Russell
3000 index return
Neutral (Hold) return within 5% of Russell 3000 index
return
Underperform (Sell) return >5% below Russell 3000
index return

Volatility index definition*
This is calculated from the volatility of historical
price movements.

Very highhighest risk Stock should be
expected to move up or down 60100% in a year
investors should be aware this stock is highly
speculative.

High stock should be expected to move up or
down at least 4060% in a year investors should
be aware this stock could be speculative.

Medium stock should be expected to move up
or down at least 3040% in a year.

Lowmedium stock should be expected to
move up or down at least 2530% in a year.

Low stock should be expected to move up or
down at least 1525% in a year.
* Applicable to Australian/NZ/Canada stocks only
Recommendations 12 months
Note: Quant recommendations may differ from
Fundamental Analyst recommendations
Financial definitions
All "Adjusted" data items have had the following
adjustments made:
Added back: goodwill amortisation, provision for
catastrophe reserves, IFRS derivatives & hedging,
IFRS impairments & IFRS interest expense
Excluded: non recurring items, asset revals, property
revals, appraisal value uplift, preference dividends &
minority interests

EPS = adjusted net profit / efpowa*
ROA = adjusted ebit / average total assets
ROA Banks/Insurance = adjusted net profit /average
total assets
ROE = adjusted net profit / average shareholders funds
Gross cashflow = adjusted net profit + depreciation
*equivalent fully paid ordinary weighted average
number of shares

All Reported numbers for Australian/NZ listed stocks
are modelled under IFRS (International Financial
Reporting Standards).

Recommendation proportions For quarter ending 31 March 2012
AU/NZ Asia RSA USA CA EUR
Outperform 53.90% 60.60% 57.50% 43.59% 66.67% 46.89% (for US coverage by MCUSA, 10.86% of stocks covered are investment banking clients)
Neutral 31.56% 23.00% 32.50% 51.09% 30.00% 32.60% (for US coverage by MCUSA, 9.50% of stocks covered are investment banking clients)
Underperform 14.54% 16.40% 10.00% 5.32% 3.33% 20.51% (for US coverage by MCUSA, 1.36% of stocks covered are investment banking clients)

Company Specific Disclosures:

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