Foundation Research Equities

PAKISTAN

Nishat Mills Limited

Portfolio value & export play!
We are initiating coverage on Nishat Mills Limited (NML) with an Outperform rating and SOTP based June11 target price of PKR82.70/share, offering an upside of 16.8% from its current price. We expect NMLs bottom line to grow by 51% YoY to PKR4,052mn (EPS: PKR11.53/share) in FY11. Almost 50% of the balance sheet value of NML comprises of its investments in other companies, majority of which are group crossholdings providing a cushion against expected slowdown in core earnings beyond FY11. We have valued companys core operations at PKR31.10/share using DCF valuation method, whereas the value of its portfolio investments is calculated at PKR51.6/share taking a discount of 25% to market prices. With the scrip trading at FY11 P/E and PBV of 6.1x and 0.63x respectively, NMLs valuations look appealing.

17 January 2011

Inside

Reasons for our Outperform rating

Introduction Exports make up a significant chunk Key benificiary of concession Cotton prices Investment portfolio Comparision to Peers Valuations Key risk Financial summary 2 3 4 5 6 8 10 12 13

Core earnings to remain healthy despite expected dip beyond FY11 During the last two years, NMLs core earnings have shown stratospheric growth (expected CAGR 79.4%), driven by a significant improvement in gross margins due to early procurement of raw cotton at lower rates and continuous increase in prices along the cotton chain. Though we expect core earnings to remain restrained during FY12-13 as margins normalize to historical 16-17% from 21% at present, underlying profits would still be very healthy vis--vis current multiples. Strong dividend income to support companys bottom-line NML has a sizable portfolio investment in its group companies with a current value of PKR24bn (PKR68/share). Dividend income from investment portfolio has always provided a cushion against volatile gross margins of textile business. However, with recent investments in low risk high yielding IPP business (NPL and AES acquisitions) starting to bear fruit, dividend income should show strong growth from FY11 onwards. The above will result in further stability and diversification in income. Key beneficiary of any future policy incentives/trade concessions Though Textile Policy announced last year with much fanfare did not lift off the ground due to governments fiscal constraints and proposed post-flood EU trade concessions were rejected by WTO, we believe all is not lost for the textile sector, given its importance to the economy and overwhelming contribution to countrys exports. With the government still negotiating trade concessions with EU (e.g. GSP Plus status) and US (extension of ROZs etc.) and committed to implementing the textile package in phases, NML, being the largest textile composite unit in Pakistan, will be a key beneficiary of any future policy incentives/trade concessions.

Target Price
June-11 price target: PKR82.70/share (PKR31.10/share core & PKR51.60/share portfolio) based on sum of parts valuation.

Action and recommendation

Analyst
Mansoor Khanani 92 21 5612290-94 Ext 345 mansoor.khanani@fs.com.pk

Given its decent medium-term earnings growth potential and attractive current valuations, we recommend Outperform rating on the stock. Trading at attractive FY11 P/E and P/BV multiples of 6.1x and 0.72x respectively, the share offers 16.8% upside to our June 2011 target price of PKR82.7.

Disclaimer: This report has been prepared by FSL. The information and opinions contained herein have been compiled or arrived at based upon information obtained from sources believed to be reliable and in good faith. Such information has not been independently verified and no guaranty, representation or warranty, express or implied is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. This document is for information purposes only. Descriptions of any company or companies or their securities mentioned herein are not intended to be complete and this document is not, and should not be construed as, an offer, or solicitation of an offer, to buy or sell any securities or other financial instruments. FSL may, to the extent permissible by applicable law or regulation, use the above material, conclusions, research or analysis before such material is disseminated to its customers. Not all customers will receive the material at the same time. FSL, their respective directors, officers, representatives, employees, related persons may have a long or short position in any of the securities or other financial instruments mentioned or issuers described herein at any time and may make a purchase and/or sale, or offer to make a purchase and/or sale of any such securities or other financial instruments from time to time in the open market or otherwise, either as principal or agent. FSL may make markets in securities or other financial instruments described in this publication, in securities of issuers described herein or in securities underlying or related to such securities. FSL may have recently underwritten the securities of an issuer mentioned herein. This document may not be reproduced, distributed or published for any purposes.

Nishat Mills Limited - Report

January 17, 2011

17 January 2011
NML PA
Stock price as of 14 Jan June 2011 target Upside/downside Valuation
- DCF based

Outperform
Rs Rs % Rs 70.8 82.7 16.8 82.7

Nishat Mills Limited - Introduction

Nishat Mills Limited was established in 1951 under the flagship of then fledgling Nishat Group. Over time, Nishat Group has evolved from a cotton export house into one of the largest business groups of Pakistan with 6 listed companies, concentrating on 4 core businesses i.e. Textiles, Cement, Banking and Power Generation. Today NML is the largest textile composite unit in Pakistan, with 2.7% share (USD278mn) in countrys textile exports. NML has also installed its own power generation plants in order to obtain reliable and cheap power. Shares of NML are listed on all three exchanges of Pakistan.

Cement Sector Market cap 30-day avg turnover Market cap Number shares on issue
Year end 30 Jun Total revenue EBIT EBIT Growth Recurring profit Reported profit m m % m m 2010A 39,111 5,740 30.1 4,052 4,052

Rs bn US$m US$m m
2011E 43,455 5,782 0.7 3,976 3,976 2012E 47,909 6,257 8.2 4,441 4,441

24.9 1.5 291 352

2013E 52,655 6,839 9.3 5,059 5,059

Investment fundamentals

Fig 01- Segment wise production capacity Segment No of m/c Spindles Spinning 200k Looms- Sulzar Weaving 64 Looms- Air-jet Weaving 619 Dyeing m/c Processing 5 Printing m/c Processing 3 Power plant Power-Gen Source: Company accounts, FS research, Jan 2011

Capacity 61mn Kg 216mn mtrs 42mn mtrs 84.46 MW

% utilization 90% 94% 88% 76%

EPS rep EPS rep growth

Rs %

8.29 129.9

11.53 39.0

11.31 (1.9)

12.63 11.7

PE rep Total DPS Total div yiel ROA ROE EV/EBITDA Net debt/equity Price/book

x Rs % % % x % x

8.5 2.50 3.5 8.0 11.7 5.0 44 0.7

6.1 3.00 4.2 7.3 10.6 4.9 45 0.7

6.3 3.00 4.2 7.6 10.9 4.5 44 0.6

5.6 3.00 4.2 8.1 11.3 4.1 44 0.6

Nishat Mills Spinning Division has more than 199,500 spindles, which are operationally organized into 8 spinning units. Nishat Mills Weaving Division has 619 modern air jet and projectile looms which produce approximate 7.4mn meters of fabric/month making it the largest weaving facility of Pakistan catering to home textile and apparel fabrics. There are two weaving units of NML. The unit at Lahore has 182 looms with production capacity of approximately 2.6mn meters/month and unit at Sheikhupura has 447 looms with production capacity of 4.8mn meters/month. With 600 modern new generation machines, the stitching department has an average capacity to process up to 2mn meters of fabric/month.

NML PA rel KSE100 performance

175 125 75
NML KSE-100

Fig 02 - Pattern of shareholding

11%

19%
25
May-10 Jul-10 Mar-10 Sep-10 Jan-10 Nov-10 Jan-11

Source: Bloomberg, Foundation Research, Jan 2011 (all figures in PKR unless noted)

34%

35%
Sponsors FI/NDFI Individuals Others

Source: Company accounts, FS research, Jan 2011

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Exports make up a significant chunk of revenue mix

As per last audited financial statements, export sales accounted for 76% of companys revenues in FY10, with products ranging from value added home textiles to cotton yarn and grey fabrics. With countrys textile exports expected to post 20% growth in FY11 due to recent upturn in the cotton cycle, NMLs export sales are likely to remain robust in the current year. Local sales have also remained strong, growing at 39% CAGR during the last three years. Initially, local sales consisted of only yarn and grey cloth. However, with companys increasing focus on launching retail outlets to benefit from changing lifestyles of the people, high-end finished products are also contributing to local sales now. NMLs operations are divided into four segments Spinning, Weaving, Processing and Finishing. Spinning segment contributes approximately 34% to the total revenue. This is followed by processing and home textiles 33% while weaving and garments contributes around 33% on combined basis. However, margins from these segments vary from time to time due to changes in business dynamics of these segments.

Fig 03 - Breakup of sales ratio

100% Exports 80% Local

Fig 04 - Sales ratio by segment

50% FY09 FY10

40%

60%

30%

40%

20%

20%

10%

0% FY09A FY10A FY11E FY12E FY13E

0% Spinning Weaving Processing Garments

Source: Company accounts, FS Research, January 2011

Core earnings to remain healthy despite expected dip beyond FY11

Rising prices of cotton and yarn will continue to boost sectors profitability in FY11 In FY10, NML witnessed a stratospheric growth of 178%YoY in its core profits to PKR2,032mn (PKR5.78/share). Spinning and garments sector remained the star performers with growth of 51% YoY and 100% YoY in revenues to PKR8,802mn and PKR2,479mn respectively. The growth in spinning sector was mainly due to purchase of cotton at lower prices from the local markets and subsequent sale of yarn at significantly higher rates due to increase in international market prices. Whereas revenue from garments segment increased on the back of improved end product prices driven by higher raw material prices. During 1QFY11, higher prices along the cotton chain continued to favor sectors profitability. We expect the trend to continue in the remaining FY11, leading to further improvement in companys core profitability. For FY11, we expect core earnings to improve by 38%YoY to PKR2,820mn (PKR8.02/share). However, being conservative, we have assumed that companys margins will revert to their historical average during FY12-14. Thus, we expect core earnings to remain restrained during FY12-13 as margins normalize to historical 16-17% from 21% at present. For FY12, we expect NMLs core earnings to decline by 20%YoY to PKR6.4/share before recovering by 12% to PKR7.1/share in FY13. Nonetheless, underlying profits would still be very healthy vis--vis current multiples.

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January 17, 2011

Fig 05 - NMLs earnings breakup (PKR/share)

10 Core 8 Dividend

0 FY09A FY10A FY11E FY12E FY13E

Source: Company accounts, FS Research, January 2011

Key beneficiary of any future policy incentives/trade concessions

Last year, the government announced countrys first textile policy with much fanfare. With the objective to increase countrys textile exports to USD25bn over a five year period, the incentives announced under aforesaid policy included concessional financing for both working capital and long-term investments, exemption from gas and electricity load shedding, enhanced drawback rates, insurance coverage, R & D support, zero-rated machinery imports etc. However, the textile policy has not been fully implemented as yet due to governments fiscal constraints. Further, proposed post-flood EU trade concessions have also been rejected by WTO. Yet, we believe all is not lost for the textile sector, given its importance to the economy and overwhelming contribution to countrys exports. The governments still negotiating trade concessions with EU (e.g. GSP Plus status) and US (duty concessions, extension of ROZs etc.) and is committed to implement the textile package in phases (1st tranche of Rs4.8bn likely to be disbursed soon). NML, being the largest textile composite unit in Pakistan, will be a key beneficiary of any future policy incentives/trade concessions.

Decreasing leverage to offset rising ERF rates

Being major exporter of Pakistan, NML significantly benefits from concessional financing offered by SBP. However, under an agreement with IMF, the central bank is gradually phasing out subsidized credit. Through a recent circular, the financing rate has been increased to 11.0% (concessional rate of 10% + 1% spread charged by the commercial bank). The above should result in higher financing cost for the company. However, as the company retains a major portion of its profits (average pay-out ratio during last 5 years 18%) and no significant expansions have been undertaken, debt ratios of the company are improving. For instance, Debt to Equity ratio has improved to 34% in FY10, as against 52% in FY09. Going forward, we expect companys debt ratio to improve further to 32% and 30% in FY11 and FY12 respectively, as the company is retiring its high cost debt with the profit retained. Due to falling debt levels, financial charges of the company are projected to rise by a manageable 9.8%YoY and 10.2%YoY to PKR1,237mn and PKR1,363mn in FY11 and FY12, respectively.

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Cotton prices significantly up since July10

According to flood-related crop damage assessment, cotton crop would be lower by 15-20% from initial expectations of 13.5-14.0bn bales for FY11. We expect that total cotton production for FY11 should be around 11.5mn bales owing to heavy rains and flash floods that have ravaged the rural areas of the country. The expected shortfall of around 2.5mn bales would likely be met through imports from international market. Since July10 cotton prices have surged by around 38% and 40% in the international and local market respectively, because of slumping inventories owing to lower production in China and Pakistan due to vagaries of weather. Further, domestic and international cotton prices both increased by sizeable 9% during last 15 trading days to PKR9,800/maund and US$110/maund respectively due to speculative buying and short supply of fiber. We expect cotton prices to remain strong going forward as global stockpiles to usage ratio is forecasted to decline to the lowest level since 1994 by the US. Department of Agriculture.

Fig 06 - International cotton prices Vs Local prices

$/Maund 150 125 100 75 50 25 New york cotton Local prices $/Maund 150 125 100 75 50 25

Apr-09

Dec-08

Aug-09

Dec-09

Apr-10

Aug-10

Source: Company accounts, FS Research, January 2011

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January 17, 2011

Investment portfolio worth NMLs market cap, get core business for free
NML currently holds an investment portfolio (mainly comprises of equity investment in its associates) worth its own market capitalization. After taking discount of 25% on market prices and valuing MCB at our target price of PKR169, the portfolio value comes to PKR18.1bn (PKR51.6/share). NML mainly holds shares of MCB Bank Limited, D. G. Khan Cement Company Limited, Nishat Power Ltd. and AES power plants in its equity portfolio. The nature of these investments seems long term, as NML has not realized any capital gains on these investments even during high interest rate environment, when the company required cash to refinance its acquisition of power plants. Therefore, we expect NML will not realize capital gains in the medium term and company will hold these investments regardless of the market price. Consequently, only actual cash flows that are received from these investments are the dividend income. Dividend income from investment portfolio has always provided a cushion against volatile margins of textile business. However, with recent investments in low risk high yielding IPP business (NPL and AES acquisitions) starting to bear fruit, dividend income should show strong growth from FY11 onwards. The above will result in further stability and diversification in income. Fig 07 - Portfolio dividends (PKR/share of NML)
Portfolio Dividends (PKR/share) MCB Bank Nishat Power D.G. Khan Cement AES Lal Pir AES Pak Gen Total Dividends (PKR/share) FY10A 1.65 1.65 FY11E 1.65 0.16 0.63 1.02 3.45 FY12E 1.79 1.14 0.16 0.79 1.07 4.96 FY13E 1.79 1.43 0.33 0.82 1.12 5.50

Source: Company accounts, FS research, January 2011

Nishat Power Limited

Nishat Power Limited is a subsidiary of Nishat Mills. The principal activity of the company is to own, operate and maintain a fuel fired power station having a gross capacity of 200MW in district Kasur, Punjab. NPL was expected to start commercial production by Sep09 and according to PPA the required COD was on Dec09. However, due to technical problems encountered by the plant, NPLs COD took place on June 09, 2010. NML holds 201mn shares (57%) of Nishat Power Limited with current market value of PKR3,635mn (PKR10.33/share of NML). Dividends from NPL are expected to provide stability to the earnings of NML. According to our dividend stream from NPL, NML is expected to receive PKR403mn (PKR 1.14/share) and PKR504mn (PKR 1.43/share) during FY12 and FY13 respectively.

AES Pakistan
AES Lal Pir and AES Pak Gen are Furnace Oil fired thermal IPPs with gross capacities of 362MW and 365MW respectively. The projects were commissioned in 1997/98 with a power purchase agreement term of 30 years with WAPDA. Nishat Mills Limited has recently acquired 32% shareholding in each power plant of AES Pakistan. According to company notices, the transaction has occurred at a substantial discount of 44% (Lalpir) and 56% (Pak Gen) to book value. Acquisition value of each IPP is around USD65mn, translating into a per MW cost of USD0.18mn, a substantial discount of more than 80% to the prevailing plant setup cost in excess of USD1mn/MW. As per our estimates these investments are expected to provide dividends of PKR578mn (PKR1.64/share) to the other income of NML in FY11.

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MCB Bank Limited

Apart from power plants, NML also has 6.92% (52.59mn shares) stake in MCB bank, which has a current market value of PKR12,808mn (PKR36/share of NML). Dividend income received from MCB bank is a major source of other income (54% to the bottom line in FY10). We expect dividend income from MCB to contribute PKR579mn to the other income in FY11.

Other Investments
The company also holds 31.4% and 14.2% shares of D. G. Khan cement and Nishat Chunian Limited with a current market value of PKR3,585mn and PKR563mn respectively, along with 15% stake in Security General Insurance and a very small holding of less than 1% in Adamjee Insurance. DGKC is expected to pay PKR100mn in the form of dividend income during FY11.

Fig 08 - NML Portfolio Stock MCB Bank Nishat Power D.G. Khan Cement AES Pak Gen AES Lal Pir Nishat Chunian Others Total Discount (25%) Portfolio value (PKR/share)

Shares (Mn) 53 201 115 119 110 23

Mkt Price 169* 18 31 14** 15** 24

Mkt value (PKR Mn) 8,913 3,635 3,585 1,652 1,648 563 135 20,131 18,152 51.6

Source: Company accounts, FS research, January 2011 * Fair value estimated by FS research

* * Not listed reported on acquisition cost

Divestment from AES Pak-gen to yield one time profit

NML has recently announced its intention to offload 10% of its stake in AES Pak-gen, recorded at its discounted acquisition cost of Rs13.87/share in the books, through an IPO. Given the fair value of AES Pak-gen investment comes to PKR19 (as calculated by an independent verifier), the company will book a capital gain of PKR55mn (PKR0.16/share) on divestment of the above.

Fig 09 - AES Pak-gen divestment at Rs19/share Investment reported at cost PKR mn No of shares to be divested mn shares Capital gain @ PKR19/share- after tax PKR mn Per share impact on EPS PKR/share
Source: Company accounts, FS research, January 2011

1,652 12 55 0.16

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Comparison to peers for 1QFY11

Fig 10 - 1QFY11 Return on assets
5%

Fig 11 - 1QFY11 - Return on equity

12%

4%

10%

8% 3% 6% 2% 4% 1% 2%

0% NML NCL KTML AMTEX ADMM

0% NML NCL KTML AMTEX ADMM

Source: Company accounts, FS Research, January 2011

Fig 12 - 1QFY11 Interest coverage ratio

5

Fig 13 - 1QFY11 Debt to equity & asset ratio

2.50

Debt to Equity

Debt to Asset

2.00

1.50

1.00

0.50

0 NML NCL KTML AMTEX ADMM

0.00 NML NCL KTML AMTEX ADMM

Source: Company accounts, FS Research, January 2011

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Fig 14 - 1QFY11 Current & Quick ratio

2.00 1.75 1.50 1.25 1.00 0.75 0.50 Current Ratio (x) Quick Ratio (x)

Fig 15 - 1QFY11 Gross & Net margins

30%

Gross Margin

Net Margin

25%

20%

15%

10%

5%
0.25 0.00 NML NCL KTML AMTEX ADMM

0% NML NCL KTML AMTEX ADMM

Source: Company accounts, FS Research, January 2011

Fig 16 - 1QFY11 Earning per share

Fig 17 - 1QFY11 Book value per share

100

80

60

40

20

0 NML NCL KTML AMTEX ADMM

0 NML NCL KTML AMTEX ADMM

Source: Company accounts, FS Research, January 2011

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Valuation: Target PKR82.7

We have valued NML using sum of parts valuation. Our DCF based valuation of the core operation evaluates at PKR31.1/share, using free cash flow from core operations. We have used a risk free rate of 14% and equity risk premium of 6%, leading to discount rate of 20% in our model. Apart from core operations we have separately accounted for the value of investment portfolio as follows, 1) MCB Bank at our target price of PKR169/share 2) AES Lalpir and AES Pak-gen at their acquisition costs 3) other investments at 25% discount to their market values. The portfolio value comes to PKR18,151mn (PKR51.6/share).

Fig 18 Value of PKR82.7/share based on sum of parts valuation (PKR mn) FY11E FY12E EBITDA 5,579 5,171 Less: Tax 450 442 Less: Change in Working capital 1,434 1,740 Less: Capex 1,487 1,804 Free Cash Flow 2,208 1,185 Discounted Free Cash Flow 2,208 1,013
(PKR mn) WACC (%) Terminal Value PV of Terminal Value FCFF Net Debt Equity Value Target price of Core operations (PKR) Portfolio value (PKR/share @ 25% Discount) Sum of Parts Target Price (PKR)
Source: FS Research, January 2011

FY13E 5,560 493 1,804 2,184 1,078 790

FY14E 6,182 562 1,609 2,640 1,371 865

16.73 28,249 16,811 21,686 10,759 10,928 31.1 51.6 82.7

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January 17, 2011

Fig - 19 PER

Source: FS Research, January 2011

Fig - 20 P/BV
P/B Average + 1std -1 std

2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 -

Dec-06

Jun-07

Dec-07

Jun-08

Dec-08

Jun-09

Dec-09

Jun-10

Source: FS Research, January 2011

11

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Key risks
Volatility in cotton prices: Profitability of NML is highly correlated with volatility in raw material prices. Therefore, any increase or decrease in cotton prices against our estimates may affect cost of sales of the company. Local and international duty irregularities: NML is basically an export oriented textile composite unit with 76% of the companys sales revenue coming from the export sales. Consequently, imposition of any regulatory duty on exports may hurt companys profitability. Moreover on the flip side, expected removal of import duty on high end products (including knit wear and bed linen) will boost NMLs export volumes. Increase/decrease in dividend payouts from associates: Dividend income from associated companies is a major source of income for NML. Therefore, any decrease in the estimated dividend payouts by the group companies will hit NMLs profitability. Shortage of raw material: Availability of raw material is the most important variable for the smooth functioning of textile unit. In case of unavailability of raw material in the local market, the company has to import it from the international market at higher rates. This will increase the cost of production and have an adverse effect on the profitability of the company.

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Nishat Mills Limited (NML PA, Outperform, Target price PKR82.70) Balance Sheet 2010A 2011E 2012E Property Plant and Equipment Long term Investments Long term Loans Other Assets Total Assets Long term Financing Total Non Current Liabilities Trade Payables Short tem Finance Total Liabilities Common Equity Reserves Total S/H's Funds Cashflow Analysis EBITDA Tax Paid Chgs in Working Cap Net Interest Paid Other Operating Cashflow Capex Others Investing Cashflow Dividend Equity Raised Debt Movement Others Financing Cashflow Net Chg in Cash/Debt Quarterly performance Net Sales Cost of Sales Gross Profit Distribution Cost Administration Cost Operating Profit EBIT Financial charges Pre-Tax Profit Net Profit After Tax EPS m m m m m m m m m m m m m m m m m m m m m m m m m m m m m m m m m m m m m m m 11,842 22,092 499 11,750 46,182 2,981 4,238 2,139 6,649 14,806 3,516 27,860 31,376 2010A 5,513 (371) (2,335) (1,127) 1,680 (1,206) (1,206) 879 1,091 648 2,619 3,093 2QFY10 7,757 6,449 1,308 401 135 771 841 288 553 497 1.41 12,205 23,197 524 14,673 50,599 2,839 4,221 2,691 8,312 16,050 3,516 31,034 34,550 2011E 6,948 (450) (1,434) (1,237) 3,826 (1,487) (1,487) 879 534 1,413 3,752 3QFY10 8,176 6,590 1,587 428 143 1,016 1,167 262 905 800 2.28 12,799 24,936 550 16,087 54,372 2,221 3,742 3,096 8,727 16,901 3,516 33,955 37,471 2012E 7,089 (442) (1,740) (1,363) 3,543 (1,804) (1,804) 1,055 274 1,328 3,068 4QFY10 9,207 7,303 1,904 543 141 1,220 1,554 318 1,235 1,105 3.14

2013E 13,671 26,183 577 17,684 58,116 1,936 3,609 3,447 9,164 17,258 3,516 37,341 40,857 2013E 7,685 (493) (1,804) (1,323) 4,064 (2,184) (2,184) 1,055 (181) 874 2,754 1QFY11 9,961 7,822 2,138 433 151 1,554 1,792 315 1,478 1,350 3.84

Profit & Loss Local Sales Export Sales Net Sales Cost of Sales Gross Profit Distribution Cost Administration Cost Operating Profit Other Operating Income Other Operating Expense EBIT Financial charges Pre-Tax Profit -Taxation Net Profit After Tax EPS (rep) EPS growth yoy (rep) EPS (adj) EPS growth yoy (adj) DPS Payout ratio Book value m m m m m m m m m

2010A 7,502 24,034 31,536 25,555 5,980 1,715 545 3,720 982 289 4,413 1,127 3,286 371 2,915 8.29 129.9 8.29 129.9 2.50 30.1 89.24

2011E 9,003 30,109 39,111 31,823 7,288 1,972 627 4,689 1,369 318 5,740 1,237 4,502 450 4,052 11.53 39.0 11.53 39.0 2.50 21.7 98.26

2012E 10,083 33,373 43,455 36,251 7,204 2,270 721 4,214 1,918 350 5,781 1,363 4,418 442 3,976 11.31 (1.9) 11.31 (1.9) 3.00 26.5 106.57

2013E 11,091 36,818 47,909 39,951 7,958 2,612 829 4,517 2,125 385 6,257 1,323 4,934 493 4,441 12.63 11.7 12.63 11.7 3.00 23.8 116.20

m m m m m

% % %

Key ratios Current Ratio Quick Ratio Cash Ratio Debt to total assets Total debt to Equity Debt % equity Long term debt to equity Long term debt % equity Earnings yield Dividend Yield Return on Equity Return on Assets Return on Fixed Assets % % % % x % x % % % % % %

2010A 1.1 0.5 0.0 0.2 0.3 34.3% 0.1 9.5% 12.8% 3.8% 9.3% 6.3% 8.5%

2011E 1.2 0.6 0.1 0.2 0.3 32.7% 0.1 8.2% 17.7% 3.8% 11.7% 8.0% 11.3%

2012E 1.2 0.5 (0.0) 0.2 0.3 30.9% 0.1 5.9% 17.4% 4.6% 10.6% 7.3% 10.4%

2013E 1.3 0.4 (0.1) 0.2 0.3 27.9% 0.0 4.7% 19.4% 4.6% 10.9% 7.6% 11.0%

All figures in PKR unless noted Source: Company data, FSL Research, January 2011

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Foundation Securities (Pvt) Limited URL: www.fs.com.pk Email: info@fs.com.pk

Offices Karachi Ground Floor, Bahria Complex II MT Khan Road Karachi UAN: 111 000 375 PABX: +9221 35612290-94 Facsimile: +9221 35612262 PABX: +9251 2879460-66 Facsimile: +9251 2879469 Islamabad 2nd Floor, Block 11 School Road, F-6 Markaz Islamabad Lahore 1st Floor, 86 Y, Commercial Area Phase 3, DHA Lahore UAN: 111 000 375 PABX: +9242 35692781-90 Facsimile: +9242 35781575

Foundation Research Analyst Syed Suleman Akhtar, CFA Asim Wahab Khan, CFA Taha Khan Javed Naukhaiz Saleem, ACCA Mansoor Khanani Hassan Raza Shahzad Usman Database Sectors Economy, Banking E&P, Refineries, Oil Marketing Fertilizers, Power, Chemicals Telecom, FMCGs, Gas Marketing PABX +92 21 3561 2290-94 x 338 +92 21 3561 2290-94 x 335 +92 21 3561 2290-94 x 313 +92 21 3561 2290-94 x 339 +92 21 3561 2290-94 x 345 +92 21 3561 2290-94 x 311 +92 21 3561 2290-94 x 312 Email suleman.akhtar@fs.com.pk awkhan@fs.com.pk taha@fs.com.pk nsaleem@fs.com.pk mansoor.khanani@fs.com.pk hasan.raza@fs.com.pk shahzad.usman@fs.com.pk

Cements, Autos, Textiles

Foundation Sales Trader Karachi Atif Muhammad Khan Siraj Ebrahim Kazi Syed Rehan Ali Zubair Ghulam Hussain Imran Abdul Aziz Faisal Khan Adnan Ahmed Usmani Islamabad Ehmer Iqbal Syed Salman Mansur Lahore Mehmood Afzal Butt Ata-ur-Rehman +92 21 3561 2253 +92 21 3561 2256 +92 21 3561 2259 +92 21 3563 5166 +92 21 3563 5013 +92 21 3561 2258 +92 21 3561 0887 atif@fs.com.pk siraj@fs.com.pk rehan@fs.com.pk zubair.hussain@fs.com.pk iaziz@fs.com.pk faisal@fs.com.pk adnan@fs.com.pk PABX Email

+92 51 287 9467 +92 51 287 9461

ehmer@fs.com.pk salman.mansur@fs.com.pk

+92 42 3569 2781 +92 42 3569 2782

mabutt@fs.com.pk arehman@fs.com.pk

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Foundation Securities (Pvt) Limited