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PAKISTAN CONSUMER SECTOR

2014YTD Review

Nov 12, 2014

Vahaj AhmedAC
vahaj.ahmed@topline.com.pk
Topline Securities, Pakistan
Table of Contents

Consumer sector growth intact in 9M2014 --------------------------------------------------------------- 3

Pakistan consumer stocks performance in 2014YTD --------------------------------------------------------------- 4

Consumer Stocks: Key Numbers --------------------------------------------------------------- 6

Consumer sector growth intact in 9M2014

With clear signs of economic recovery, our broader sample of consumer firms showed stable sales and
profitability growth in 9M2014.

Sales revenues of Pakistan listed consumer stocks increased by 12.4% versus 12.2% growth in 2013. Sales
growth in 9M2014 was, however, slower than 5-year (2009-13) CAGR of 17.2%.

Gross margins in 9M2014 stood at 25.7% versus 27.0% in corresponding period last year.

Bottom-line profitability increased by 17.9% in 9M2014 vs. 11% in 2013. This profitability growth is in line
with 5-year (2009-13) profit CAGR of 17.3%.

In 9M2014, profits margins increased by 37bps to 7.9%.

For performance evaluation, we have selected a diversified sample of 47 consumer firms with the aggregate
market capitalization of Rs1.5tn (US$14.9bn), 21% of total market cap of KSE. Our sample includes food,
beverages, pharmaceuticals, tobacco, footwear and personal care items producers.

Consumer Stocks: Gross & Net Margins

30%

25% 27.3% 27.0%

26.4% 25.7%
20% 22.7%

15%

10% 8.3% 7.5% 7.9%

7.3% 7.3%

5%

0%
2011 2012 2013 9M2013 9M2014
Source: Company Accounts

November 2014 3
Pakistan consumer stocks performance in 2014YTD

Consumer stocks gained 42% in 2014YTD vs. KSE-100 Index return of 22%. In 2013 as well, these
consumer stocks outperformed by posting return of 85% versus 49% of KSE-100 Index.

Within our sample of consumer stocks, EXIDE, AKZO, HUMNL, IBLHL and GTYR were star performers with
gains of 318%, 214%, 198%, 191% and 189%, respectively.

Market float/volume of consumer stocks is low in Pakistan. In 2014YTD, average daily turnover in these
stocks was US$7.3mn compared to average daily turnover of US$86.1mn at KSE. EFOODS was the most
traded stock in the sample with US$1.7mn average daily turnover in 2014YTD.

Due to consistently high growth outlook and limited availability of scrips, our sample companies are trading
at 2014E PE of 33.7x. However, if we exclude outliers (NESTLE, PAKT & RMPL), 2014E PE is at 27.9x.

In terms of price to sales, these sample companies are trading at 2014E PS of 2.9x. However, if we exclude
outliers (NESTLE, PAKT & RMPL), 2014E PS is at 2.2x.

November 2014 4
Pakistan consumer stocks performance in 2014YTD
Symbol Company Name 2014YTD Return
EXIDE Exide Pakistan 318%
AKZO Akzo Nobel Pakistan 214%
HUMNL Hum Network 198%
IBLHL IBL HealthCare 191%
GTYR General Tyre & Rubber Co. 189%
SEARL Searle Pakistan 187%
FEROZ Ferozesons Lab 155%
MUREB Murree Brewery Company 151%
PKGS Packages 148%
PMPK Philip Morris (Pakistan) 144%
SCL Shield Corporation 128%
THALL Thal Limited 108%
TGL Tariq Glass Industries 102%
HINOON Highnoon Lab. 99%
SRVI Service Industries 97%
KHTC Khyber Tobacco 92%
ATBA Atlas Battery 88%
UBDL United Brands 80%
PAKT Pakistan Tobacco Company 79%
GLAXO GlaxoSmithKline Pakistan 76%
CLOV Clover Pakistan 70%
KCL Karam Ceramics 62%
GLPL Gillette Pakistan 62%
NATF National Foods 61%
ABOT Abbott Laboratories Pakistan 58%
IGIIL IGI Insurance 47%
RMPL Rafhan Maize Products Co. 39%
ISIL Ismail Industries 38%
TREET Treet Corporation 31%
STCL Shabbir Tiles & Ceramics 28%
SHFA Shifa International Hospitals 27%
SHEZ Shezan International 21%
NMFL Nirala MSR Foods 20%
BERG Berger Paints Pakistan 16%
BATA Bata Pakistan 14%
NESTLE Nestle Pakistan 12%
MFFL Mitchell's Fruit Farms 8%
GHGL Ghani Glass 7%
QUICE Quice Foods 2%
UPFL Unilever Pakistan Foods -1%
COLG Colgate - Palmolive Pakistan -2%
WYETH Wyeth Pakistan -2%
SAPL Sanofi-Aventis Pakistan -6%
EFOODS Engro Foods -7%
SING Singer Pakistan -10%
ZIL ZIL Limited -22%
NOPK Noon Pakistan -32%
Source: KSE, Topline Research

November 2014 5
Consumer Stocks: Key Numbers
Year Share Price Market Cap Market Cap 2014YTD Avg. 2009-13 CAGR 2013A 2014A/E
Symbol Company Name Business
End (Rs) (Rs mn) (US$ mn) Daily Vol. US$ Sales Profit PE PS PE PS
NESTLE Nestle Pakistan Dairy, Juices, Water, Baby Food Dec 8,330 377,762 3,691 43,342 20% 30% 64.4 4.4 42.1 3.7
PAKT Pakistan Tobacco Company Tobacco Dec 1,000 255,494 2,496 102,285 10% 50%* 81.8 8.3 46.6 6.7
RMPL Rafhan Maize Products Co. Starch, Glucose, Gluten, Powder Glues Dec 11,085 102,385 1,000 19,984 17% 13% 36.8 4.3 34.6 3.6
COLG Colgate - Palmolive Pakistan Oral Care, Personal Care, Fabric Care Jun 1,604 76,920 752 8,370 23% 19% 48.4 3.8 45.4 3.3
EFOODS Engro Foods Dairy, Ice Cream Dec 97 74,168 725 1,749,341 36% 70%* 85.2 2.0 166.9 1.8
GLAXO GlaxoSmithKline Pakistan Pharma, Consumer Healthcare Dec 215 68,445 669 1,055,510 13% -11% 64.4 2.7 38.4 2.4
ABOT Abbott Laboratories Pakistan Pharma, Nutrition, Diagnosis Dec 614 60,149 588 282,388 19% 24% 23.8 3.5 21.3 3.1
PMPK Philip Morris (Pakistan) Tobacco Dec 965 59,425 581 19,860 4% NM NM 1.8 NM 3.7
PKGS Packages Paper, Packaging, Equity in NESTLE Dec 669 56,481 552 425,249 4% 21%*** 31.4 1.5 18.7 3.5
UPFL Unilever Pakistan Foods Food, Drink Products Dec 9,120 56,156 549 2,302 18% 24% 55.9 8.1 42.3 6.8
NATF National Foods Recipe Masala, Ketchup, Jams, Rice Jun 701 36,320 355 61,134 23% 34% 53.9 4.2 51.3 3.7
IGIIL IGI Insurance Insurance, Equity in NESTLE, PKGS Dec 242 29,632 290 340,095 14% 304%** 36.5 NA 18.9 NA
BATA Bata Pakistan Footwear Dec 3,102 23,454 229 22,343 20% 21% 19.0 1.8 17.2 1.6
MUREB Murree Brewery Company Alcoholic / Non-Alcoholic Beverages Jun 1,000 23,053 225 113,063 20% 30% 32.1 5.3 23.9 4.5
THALL Thal Limited Papersack, Engineering, Equity in Metro Jun 279 22,641 221 182,929 11% 17% 13.9 1.8 16.6 1.9
SEARL Searle Pakistan Pharma, Nutritional, Healthcare Jun 253 21,750 213 661,530 20% 30% 41.5 4.2 27.1 2.9
AKZO Akzo Nobel Pakistan Paints, Speciality Chemicals Dec 375 17,413 170 265,638 11%*** 66%*** 28.7 3.3 32.8 3.5
HUMNL Hum Network Media Jun 161 15,235 149 131,301 20% 11% 39.3 6.6 25.7 5.3
ISIL Ismail Industries Candies, Chocolates, Jellies, Toffees Jun 284 14,323 140 2,255 23% 28% 40.0 1.4 28.5 1.3
SRVI Service Industries Footwear, Tyre Dec 1,053 12,665 124 97,267 18% 13% 20.5 0.9 13.3 0.7
ATBA Atlas Battery Electric Storage Batteries Jun 721 12,551 123 24,194 28% 40% 21.5 1.4 16.9 1.0
EXIDE Exide Pakistan Electric Storage Batteries Mar 1,587 12,329 120 50,700 30% 39% 25.4 1.1 30.7 1.1
FEROZ Ferozesons Lab Pharmaceutical Jun 392 11,831 116 135,591 25% 16% 26.0 4.1 22.5 3.1
GTYR General Tyre & Rubber Co. Tyres Jun 146 8,707 85 271,414 12% 22%* 22.0 1.1 16.9 1.0
GLPL Gillette Pakistan Blades, Razors, Personal Care Jun 450 8,640 84 1,800 17% 122% 34.1 4.9 149.0 4.2
SHFA Shifa International Hospitals Healthcare Services Jun 162 8,193 80 47,950 26% 20% 21.1 1.5 17.6 1.3
GHGL Ghani Glass Container / Float Glass Jun 64 7,887 77 36,163 21% 10% 9.1 0.8 8.6 0.8
SAPL Sanofi-Aventis Pakistan Pharmaceutical, Consumer Products Dec 712 6,862 67 9,075 15% 52% 22.1 0.8 54.1 0.7
TREET Treet Corporation Blade, Motorbikes, Soaps, Packaging Jun 126 6,414 63 568,683 24% 56% 29.9 1.1 27.3 0.9
SHEZ Shezan International Beverages, Syrups, Prickle, Sauces, Jam Jun 802 6,401 63 13,411 18% 9% 25.7 1.1 24.6 0.9
WYETH Wyeth Pakistan Pharmaceutical, Ethical Specialties Nov 4,400 6,255 61 9,361 6% -25% 184.4 2.0 NM 1.9
IBLHL IBL HealthCare Pharmaceutical Jun 161 4,820 47 63,288 6% 45% 47.9 5.6 32.3 5.3
MFFL Mitchell's Fruit Farms Jams, Pickles, Grocery, Confectionery Sep 594 4,680 46 9,167 15% 74% 35.4 2.2 43.5 2.0
HINOON Highnoon Lab. Pharmaceutical, Allied Dec 240 4,366 43 59,925 9% 20% 28.1 1.5 8.1 1.2
TGL Tariq Glass Industries Glass Tableware Jun 48 3,559 35 181,386 22% 61%** 9.7 0.9 215.8 0.5
STCL Shabbir Tiles & Ceramics Ceramic / Porcelain Tiles, Building Materials Jun 11 1,719 17 35,214 19% -3% 20.9 0.4 NM 0.4
BERG Berger Paints Pakistan Paints, Varnishes Jun 83 1,506 15 87,157 6% 21%* 25.6 0.4 15.4 0.3
SCL Shield Corporation Oral, Baby Care Jun 340 1,326 13 587 22% 47% 33.6 1.1 57.2 1.1
CLOV Clover Pakistan Food, Drink, Personal Care Jun 108 1,019 10 9,990 -38% -8% 16.2 9.9 22.8 24.5
SING Singer Pakistan Household Electrical Appliances Dec 21 969 9 2,828 1% -7% 26.7 0.4 NM 0.6
UBDL United Brands Trade / Distribution of Consumer Goods Jun 82 884 9 230 24% 54% 31.5 0.4 66.5 0.7
QUICE Quice Foods Syrup, Squash, Jams, Jelly, Custard Jun 8 589 6 44,864 31% -45% NM 2.9 NM 2.9
KHTC Khyber Tobacco Tobacco Jun 479 576 6 3,148 67% 30% 13.8 0.3 NM 0.6
ZIL ZIL Limited Home / Personal Care Dec 89 544 5 2,881 6% -3% 18.5 0.4 NM 0.4
NMFL Nirala MSR Foods Sweets, Foods, Dairy Jun 22 360 4 50,353 NA NA NA NA 54.8 2.2
NOPK Noon Pakistan Dairy, Juices, Food Jun 30 358 3 1,079 13% NM NM 0.1 NM 0.2
KCL Karam Ceramics Ceramics, Pottery, Crockery, Tiles Jun 19 275 3 445 10% -21% 114.6 0.2 16.2 0.2
Total Weighted Average 1,527,491 14,924 17% 17% 43.8 3.3 33.7 2.9
Total excluding Top Three (NESTLE, PAKT, RMPL) 17% 18% 33.6 2.6 27.9 2.2
Source: Company Accounts, Topline Research *3-Year CAGR, **2-Year CAGR, ***2013 Profit Growth NA = Not Applicable, NM = Not Meaningful
Prices as on Nov 7, 2014
*3-Year CAGR, **2-Year CAGR, *** 2013 Profit Growth

November 2014 6
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Research Team:

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Disclaimer

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