Result Update

February 24, 2009

Pakistan Equity Research

Result Update
Al-Ghazi Tractors Ltd.
JUST-IN-LINE
AGTL offered a final cash dividend of PkR12.50/share bringing its full year DPS to PkR17.50, a slightly lower payout than the previous year given the 12% decline in its bottomline. Going slow: By increasing its market share to 55% in the latter half of CY08 and raising prices, Al-Ghazi showed a topline growth of 11%. However, surging inflation raised COGS by 15%. As a result, gross margin narrowed to 16% versus 18% in CY07. More ominously, the last quarter (4QCY08) not only saw a dip in net sales but also a further squeeze on gross and operating margins which contracted to 10% and 9% respectively. This is in contrast to the better margins achieved by the arch rival, Millat Tractors which posted a 15% gross margin and 11% operating margin in the same period. Cost maintenance: Despite the increase in transportation costs, at the mercy of oil prices, AGTL kept its selling and admin costs as a percentage of revenue in line with the previous year. With plentiful liquid assets on the balance sheet, AGTL has felt no need for gearing and has enjoyed the income on deposits. However, CY08 has seen other income lose strength (down 29% on a yearly basis) as the bank balances and short term investments were expended. Other expenses were lower due to lower profits available for allocations to WWF and WPPF. Tractor Schemes: AGTL closed the year with a bottomline of PkR1.1bn, 12% poorer than CY07, but given the slowdown in economy and the tight monetary situation, tractor manufacturers are still better off than the ailing auto sector. The Benazir Tractor Scheme announced recently entails subsidizing about 20,000 tractors. If put into action, this scheme can supplement the topline growth, but given the fate of the Green Tractor Scheme announced in 3QCY08 we take the stance: "We will believe it when we see it!"

Alpha Beta Capital Markets

Alpha Beta Capital Markets (Private) Limited

Alpha Beta Research

research@alphabetacm.com

Lubaina Jamali
lubaina.jamali@alphabetacm.com

KAT Code: AGTL Priced on February 24, 2009 Price Market Cap (PkRmn) 12 Dec to date High (PkR) 12 Dec to date Low (PkR) 12 Dec to date Avg Daily T/O (shares) 12 Dec to date Avg DT Value (PkR000) RoE (%) 2008 PER (x) 2008 P/B (x) 2008 130.81 5,616 218.5 115 8,353 1,094 26.76 5.04 0.68

Result Review
(PkRmn) Sales COGS Gross Profit GP Margin Selling Expenses Administration Expenses Operating Profit OP Margin Other income Other expenses Finance cost Profit Before Taxation Taxation Profit After Tax Net Margin EPS - basic and diluted Source: Company Reports CY08 10,108 8,530 1,578 16% 75 92 1,411 14% 399 125 3 1,683 570 1,113 11% 25.93 CY07 9,081 7,428 1,653 18% 67 86 1,500 17% 559 142 3 1,914 647 1,267 14% 29.52 Change 11% 15% -5% (260)(bps) 12% 7% -6% (256)(bps) -29% -12% -9% -12% -12% -12% (294)(bps) -12%

Quarterly Performance
(PkRmn)
3,500 3,000 2,500 2,000 1,500 1,000 500 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08

Net Sales
20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0%

Gross Margin

1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08

NPAT
450 400 350 300 250 200 150 100 50 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0%

Operating Margin

1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08

Important disclosures Please see important disclosures including investment banking relationships disclaimers and analyst certification at end of this report. Alpha Beta Capital Markets (Pvt.) Limited does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of the report. Investors should consider this report as only a single factor in making their investment decision.

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