Morning Briefing

Monday, March 24, 2014

FOOD PRODUCERS: Earnings decline but outperforming

In our today's morning briefing we would discuss the performance of Food producer sector in 2013-14.

Trading at highly expensive multiples

Market Review
KSE 100 Index
KSE 30 Index
KMI 30 Index
All Share Index
Market Cap. (Rs bn)

Last
Change
26,765.49 -383.03
18,990.38 -348.77
44,606.35 -604.01
20,026.10 -249.31
6,460.62
-83.52

The sector is currently trading at highly expensive PE multiples of 57.3 as

against a PE multiples of 8 of KSE-100 Index due to buyback rumors in few
companies after Unilver Buyback and Nestle India. Furthermore, lower multiple remain also reason to corner float by major institution. We believe this is
unjustified and can witness heavy sell-off once market goes through a bearish
trend. Therefore investors are advised to adopt a cautious stance and switch to
other sector.

Outperforming KSE-100 index so far in CY14

The sector has posted a return of 15% so far in CY14 outperforming the benchmark KSE-100 index by 9% which
Sector Cap Relative to KSE 100 Index
Inde x
posted a return of 6%. This was main- 28,000
ly on back of tremendous performance 25,000
by NESTLE which posted a return of 22,000
27.5% in CY14TD outperforming 19,000
KSE-100 index by 21.5% primarily 16,000
owing to buyback news of NESTLE
India. Second on the list was National
KSE 100 Index
Food Producers
Foods whose return stayed in line with
Source:
WE
Research
the benchmark index.
Sector
cap in bn

800
700
600
500
400

Jan-14

Feb-14

Dec-13

Oct-13

Nov-13

Sep-13

Jul-13

Aug-13

Jun-13

Apr-13

May-13

300

Mar-13

Volume
14,782,000
11,662,000
9,405,000
7,747,000
5,402,400

Jan-13

Close
15.17
25.86
11.24
10.99
44.33

Feb-13

Volume Leaders
TRG
BAFL
LPCL
JSCL
AICL

Cumulative profit slips in 2013

KSE Statistics

March 21, 2014

Indices
All Share Index
KSE-30TM Index
KSE-100TM Index

20,026.10
18,990.38
26,765.49

Turnover
All Share Index
KSE-30TM Index
KSE-100TM Index

159,929,530
66,417,000
125,970,260

Board Meetings
Company
Askari general insurance Co Ltd
Punjab Oil Mills Limited
Security Investment Bank Ltd
Singer Pakistan Limited
P.I.B. Terminal
Fatima Fertilizer Company
Wyeth Pakistan Limited
Sindh Abadgar's Sugar Mills Ltd
First Al-Noor Modaraba
Linde Pakistan Limited
Unilever Pakistan Foods Ltd

The cumulative earnings of the food producers sector declined by 11.2% to

Rs 10,457 million in 2013 as compared to a profit after taxation (PAT) of Rs
11,770 million in 2012 primarily due to heavy decline in earnings of EFOODS.
For our analysis, we have taken companies of the sector that are in KSE-100
index which includes; Nestle, Engro Foods, Rafhan Maize, National Foods, and
JDW Sugar. The net sales of the sector totaled Rs 183,519 million in 2013
which is 8.8% more from net sales of Rs 168,706 million in 2012. The gross
margin of the sector reduced to 23% in 2013 as against 24% in 2012. The payout ratio of the sector climbed to 74% in 2013 versus 43% in 2012. The rise in
payout ratio was on back of almost 97% payout by NESTLE.

Rafhan stays best performer, EFOODS the worst one

Date

Time

24-03-2014
24-03-2014
25-03-2014
26-03-2014
26-03-2014
27-03-2014
27-03-2014
27-03-2014
05-04-2014
16-04-2014
24-04-2014

11:00
11:30
4:00
11:45
3:30
12:30
2:30
4:00
11:30
11:00
2:30

Rafhan stood as the best performer among the companies in our analysis as the
company earned a PAT of Rs 2,781 million (EPS: Rs 301.1) in 2013 growing by
36.3% from a PAT of Rs 2,040 million (EPS: Rs 220.9) in 2012. On the negative side, EFOODS stood as the worst performer in the sector and was the main
culprit due to which the earnings of the sector declined. EFOODS earned a PAT
of Rs211 million (EPS: Rs 0.3) in 2013 which is around 92% less versus a PAT
of Rs 2,595 million (EPS: Rs 3.4) in 2012. The massive decline in the earnings
of EFOODS was mainly due to lower sales by the company as it faced issues in
its distribution process. The detailed performance of the companies in our
analysis can be seen in the tables on the next page.

Disclaimer: All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at
the time of publishing. However, we do not accept any responsibility for its accuracy & completeness and it is not intended to be an offer or a
solicitation to buy or sell any securities. WE Financial Services & its employees will not be responsible for the consequence of reliance upon any
opinion or statement herein or for any omission. All opinions and estimates contained herein constitute our judgment as of the date mentioned in
the report and are subject to change without notice.
For live markets, historical data, charts/graphs and investment/technical analysis tools, please visit our website www.weonline.biz

We Research is Available on Thomson Reuters, Bloomberg, S & P Capital IQ, FactSet

Morning Briefing
Monday, March 24, 2014

Food Producers Financial Snapshot

Net Sales
Gross Profit
Profit after Taxation
PAT Growth (%)
PER (x)
P/BVS (x)
P/Sales (x)
Dividend Yield (%)
Payout (%)
Gross Margin (%)
Net Margin (%)

2009
80,906
20,351
4,596
49%
27.8
8.8
1.6
2.9%
82%
25%
5.7%

2010
111,215
26,532
7,459
62.3%
27.2
10.2
1.8
2.4%
66%
24%
6.7%

2011
143,205
32,863
9,196
23.3%
29.0
10.1
1.9
1.8%
52%
23%
6.4%

2012
168,706
40,512
11,770
28.0%
29.4
9.9
2.0
1.4%
43%
24%
7.0%

2013
183,519
42,706
10,457
-11.2%
57.3
13.7
3.3
1.3%
74%
23%
5.7%

Nestle
Net Sales
Gross Profit
Profit after Taxation
EPS (Rs)
DPS (Rs)
PE (x)
P/BVPS (x)
P/ Sales (x)
Dividend Yield (%)

2009
41,156
11,899
3,005
66.3
60
18.8
12.8
1.4
4.8%

2010
51,487
13,879
4,113
90.7
75
26.2
19.3
2.1
3.2%

2011
64,824
16,725
4,668
102.9
65
34.9
21.4
2.5
1.8%

2012
79,088
21,523
5,865
129.3
70
36.6
18.6
2.7
1.5%

2013
86,227
24,161
5,867
129.4
125
69.5
25.0
4.7
1.4%

Efoods
Net Sales
Gross Profit
Profit after Taxation
EPS (Rs)
PE (x)
P/BVPS (x)
P/ Sales (x)

2009
14,665
2,502
(433)
(0.6)
NM
22.2
2.9

2010
20,945
4,393
176
0.2
425.9
14.6
2.0

2011
29,859
6,629
891
1.2
84.0
10.3
1.4

2012
40,169
10,321
2,595
3.4
28.9
7.5
1.1

2013
37,891
8,173
211
0.3
NM
8.1
1.3

Rafhan Maize
Net Sales
Gross Profit
Profit after Taxation
EPS (Rs)
DPS (Rs)
PE (x)
P/BVPS (x)
P/ Sales (x)
Dividend Yield (%)

2009
11,428
2,435
1,297
140.4
90
10.6
3.4
1.2
6.1%

2010
13,913
3,298
1,838
199.0
115
10.6
3.9
1.4
5.5%

2011
18,271
3,800
2,034
220.2
125
11.4
3.9
1.3
5.0%

2012
19,531
3,975
2,040
220.9
125
18.1
5.4
1.9
3.1%

2013
23,673
4,213
2,781
301.1
135
26.6
7.7
3.1
1.7%

National Foods
Net Sales
Gross Profit
Profit after Taxation
EPS (Rs)
DPS (Rs)
PE (x)
P/BVPS (x)
P/ Sales (x)
Dividend Yield (%)

2009
3,759
1,126
139
3.4
19.9
4.2
0.7
-

2010
4,490
1,327
87
2.1
1.2
33.2
3.9
0.6
1.7%

2011
5,521
1,574
231
5.6
2.5
11.4
2.9
0.5
3.9%

2012
7,169
2,331
583
14.1
6
20.5
8.5
1.7
2.1%

2013
8,546
2,957
673
16.2
7.5
30.0
12.0
2.4
1.5%

JDW Sugar
Net Sales
Gross Profit
Profit after Taxation
EPS (Rs)
DPS (Rs)
PE (x)
P/BVPS (x)
P/ Sales (x)
Dividend Yield (%)
Source: WE Research

2009
9,898
2,388
588
9.8
4
5.3
1.6
0.3
7.7%

2010
20,380
3,636
1,246
20.8
7
4.3
1.6
0.3
7.9%

2011
24,729
4,135
1,372
23.0
9
3.2
0.9
0.2
12.3%

2012
22,750
2,362
688
11.5
6
10.2
1.4
0.3
5.1%

2013
27,183
3,202
925
15.5
6
12.4
2.1
0.4
3.1%

We Research is Available on Thomson Reuters, Bloomberg, S & P Capital IQ, FactSet

Morning Briefing
Monday, March 24, 2014

Key Data

Pivot Analysis

Money Market

Company

CR

RSI

Buy 1

Buy 2

Sell 1

Sell 2

Pivot

T-Bills (3 Mths) 19-Mar-2014 9.96%

T-Bills (6 Mths) 19-Mar-2014 9.98%
T-Bills (12 Mths) 19-Mar-2014 9.99%
Discount Rate
16-Mar-2014 10.00%
Kibor (1 Mth)
21-Mar-2014 10.24%
Kibor (3 Mths)
21-Mar-2014 10.04%
Kibor (6 Mths)
21-Mar-2014 10.08%
Kibor (9 Mths)
21-Mar-2014 10.36%
Kibor (1 Yr)
21-Mar-2014 10.39%
P.I.B (3 Yrs)
21-Mar-2014 11.70%
P.I.B (5 Yrs)
21-Mar-2014 12.15%
P.I.B (10 Yrs)
21-Mar-2014 12.70%
P.I.B (15 Yrs)
21-Mar-2014 12.85%
P.I.B (20 Yrs)
21-Mar-2014 12.90%
P.I.B (30 Yrs)
21-Mar-2014 13.00%
Commodities
*Crude Oil (brent)$/bbl
107.23
*Crude Oil (WTI)$/bbl
99.40
*Cotton $/lb
92.92
*Gold $/ozs
1,334.65
*Silver $/ozs
20.41
Malaysian Palm $
842
*GOLD (PMEX) PKR
43,170
KHI Cotton 40Kg PKR
7,127

KSE 100 INDEX

26765.49
Attock Cement
139.12
Adamjee Insurance
44.33
Askari Bank
17.20
Azgard Nine
7.24
Attock Petroleum
533.30
Attock Refinery
216.21
Bank Al-Falah
25.86
BankIslami Pak
9.99
Bank.Of.Punjab
10.50
Faysal Bank
13.20
Fauji Cement
17.28
Fauji Fert Bin
41.28
Fauji Fertilizer
108.93
Habib Bank Ltd
164.01
Hub Power
52.49
ICI Pakistan
332.17
Lucky Cement
318.64
MCB Bank Ltd
246.55
Maple Leaf Cement
29.38
National Bank
51.56
NIB Bank
2.17
Oil & Gas Dev. XD
251.89
P.S.O. XD
429.18
P.T.C.L.A
30.51
Sui North Gas
23.92

52.19
59.53
55.67
68.64
35.83
55.53
48.55
31.35
63.01
40.93
56.67
62.43
30.86
39.28
38.08
29.36
70.71
43.28
23.58
50.02
35.21
37.06
26.74
83.21
55.72
81.43

26,562
137.70
43.75
17.00
7.10
528.75
213.00
25.25
9.80
10.45
13.00
17.15
41.05
108.50
159.20
52.00
328.10
315.75
240.70
29.10
50.60
2.15
247.00
425.55
30.25
23.30

26,359
136.25
43.20
16.80
6.95
524.15
209.80
24.60
9.65
10.35
12.75
17.05
40.80
108.05
154.35
51.50
324.05
312.90
234.85
28.80
49.65
2.10
242.10
421.95
29.95
22.65

27,089
140.35
44.90
17.50
7.45
540.15
221.40
26.85
10.10
10.60
13.55
17.45
41.50
109.60
166.70
53.00
337.10
323.75
253.80
29.85
52.80
2.25
260.35
433.65
30.95
24.40

27,413
141.55
45.50
17.75
7.65
546.95
226.60
27.90
10.20
10.70
13.85
17.65
41.75
110.25
169.35
53.50
342.05
328.90
261.10
30.30
54.05
2.30
268.80
438.15
31.40
24.90

26,886
138.90
44.35
17.30
7.30
535.55
218.20
26.25
9.90
10.55
13.30
17.35
41.25
109.15
161.85
52.50
333.05
320.90
247.95
29.55
51.85
2.20
255.45
430.05
30.70
23.75

Portfolio Investment (U.S $ in million)

Yearly(Jul, 2017 up to 20-Mar-2014)
Monthly(Mar, 2017 up to 20-Mar-2014)

108.37
-4.55

Daily (20-Mar-2014)

-0.73

Total Portfolio Investment (28-Feb-2014)

4816

NCCPL (U.S $ in million)

FIPI (21-Mar-2014)
Local Companies (21-Mar-2014)
Banks / DFI (21-Mar-2014)
Mutual Funds (21-Mar-2014)
NBFC (21-Mar-2014)
Local Investors (21-Mar-2014)
Other Organization (21-Mar-2014)

-4.37
1.06
2.18
-0.62
1.00
1.83
-1.07

CR = Yesterday's Closing Rate; RSI = 14 day RSI.

RSI Indication: Less than 30 Indicate oversold position & Greater than 70 Indicate overbought
position.

GDR Update
Symbol
$.Price
MCB (1 GDR= 2 Shares)
5.00
OGDC (1 GDR= 10 Shares) 25.24
UBL (1 GDR= 4 Shares)
2.50
LUCK (1 GDR= 2 Shares)
6.00
HUBC (1 GDR= 25 Shares) 13.44

WE Financial Services
Corporate Office
506, Fifth Floor,
Karachi Stock Exchange Building,
Stock Exchange Road,
Karachi - 74000,
Pakistan
URL: www.we.com.pk

PKR/S
245.40
247.76
61.35
294.48
52.77

Book Closure
Company

Nishat Power
Habib Bank Ltd.
Kohinoor Spinning Mills
Chakwal Spinning Mills
EFU General Insurance
Din Textile Mills
Pak Datacom
EFU Life Assurance
Sunrays Textile Mills
Indus Dyeing & Mfg.
Atlas Insurance
Linde Pakistan
Abbott Laboratories

From

To

D/B/R

Spot Date

AGM-EOGM

22-03-2014
22-03-2014
22-03-2014
22-03-2014
28-03-2014
28-03-2014
28-03-2014
28-03-2014
28-03-2014
28-03-2014
03-04-2014
03-04-2014
09-04-2014

29-03-2014
29-03-2014
28-03-2014
28-03-2014
05-04-2014
04-04-2014
04-04-2014
05-04-2014
03-04-2014
03-04-2014
10-04-2014
16-04-2014
16-04-2014

10(II)
20(F),10(B)
10(I)
5(I)
40,28(B)
25(I)
20(I)
50
100(II)
100(II)
50(F),10(B)
40(F)
40(F)

14-03-2014
14-03-2014
14-03-2014
14-03-2014
20-03-2014
-

29-03-2014
05-04-2014
05-04-2015
10-04-2014
16-04-2014
16-04-2014

Indications
# Extraordinary General Meeting

Disclaimer: All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of publishing. However, we do not accept any responsibility for its accuracy & completeness and it is not intended to be an offer or a solicitation to buy or sell any securities. WE Financial Services & its employees will not be responsible for the consequence of reliance upon any opinion or statement herein or for any omission.
All opinions and estimates contained herein constitute our judgment as of the date mentioned in the report and are subject to change without notice.
For live markets, historical data, charts/graphs and investment/technical analysis tools, please visit our website www.weonline.biz

We Research is Available on Thomson Reuters, Bloomberg, S & P Capital IQ, FactSet