Pakistan Stock Market Weekly Review

The KSE-100 Index gained 1.88%WoW to close at 23,673 points this week while average daily volumes recovered to 220.5mn shares after relatively subdued volumes last week. Key news flows this week included 1) tension between India and Pakistan escalated with exchange of fire over the border,

2) PTA successfully blocked numerous servers and gateways of international carriers involved in grey telephony, 3) cement manufacturers could look to increase cement prices by PkR35-40/bag, and 4) the ECC did not approve removal of subsidy on fertilizers in order to protect flood-hit farmers. Within the AKD Universe, top gainers during the week were ICI (+9.9%WoW), DAWH (+5.7%), SHEL (+5.5%), AKBL (+5%) and OGDC (+4.3%). Top losers during the week were INDU (-4.2%WoW), EFOODS (-3.1%WoW), PTC (-2.3%WoW), MEBL (-1.9%WoW) and POL (-1.5%WoW). Volumes were led by BOP (117.28mn shares), FCCL (62.18mn shares), NBP (47.41mn shares), JSCL (32.94mn shares) and ENGRO (30.8mn shares).

PSMC: 1HCY13 Result Preview

Pak Suzuki Motor Company Limited (PSMC) is scheduled to announce its 1HCY13 result on Monday, Aug 19'13. We expect the company to post NPAT of PkR958mn in 1HCY13 vs. NPAT of PkR1,369mn in 1HCY12, down 30%YoY. This translates into an EPS of PkR11.64 in 1HCY13 vs. EPS of PkR16.64 in 1HCY12. To recall, the company sold 41,326 units in the review period, down by 33%YoY (-ve 14%YoY normalized for the Punjab Taxi Scheme last year and +ve 7%YoY if sales of the now phased-out Alto are excluded as well). In our view, this is largely due to sustained competition from imported used cars. At the same time, we expect gross margins to be at 5.1% in 1HCY13 where gross margins in the same period last year were at 6.2%. In 2QCY13 alone, we expect PSMC's NPAT to clock in at PkR596mn (EPS: PkR7.24) vs. NPAT of PkR362mn (EPS: PkR4.40) in 1QCY13, up 65%QoQ. In this regard, in 2QCY13 the company sold 20,222 units vs. sales of 21,104 units in the previous quarter. However, profitability is likely to be sequentially higher where we have assumed that PSMC will record net gains of PkR274.5mn (EPS impact: PkR3.34/share) which arose consequent to a land sale. The scrip has gained 77%CYTD, thereby outperforming the KSE-100 Index by 37% in the process. That said, we believe upcoming results have the potential to excite where our TP of PkR178/share for PSMC (normalized CY13F P/E: 7.4x) offers 15% upside. Accumulate!

HUBC: FY13 Result Preview

HUBC is scheduled to announce its FY13 result on Aug 19'13. We expect the company to post NPAT of PkR10,208mn (EPS: PkR8.82) in FY13, a growth of 25%YoY. In 4QFY13 we expect the company to post NPAT of PkR2,780mn (EPS: PkR2.40), a decline of 13%YoY and a muted sequential growth of 5%QoQ, where working capital constraints led to a complete shut-down of the Narowal plant in 4QFY13. Importantly, during 4QFY13, HUBC received substantial payments worth ~PkR92.4bn in lieu of circular debt payments from the GoP, thereby improving the company's liquidity position and paving the way for a higher payout. As a result we expect the company to announce a final cash dividend of PkR4.5/share, taking cumulative payout for the year to PkR8/share. Going forward, we expect higher earnings from the Narowal plant and an improved liquidity situation across the energy chain from an increase in power tariffs to sustain the company's payout ability, where HUBC trades at an FY14F D/Y of 13% and provides an upside of 13% to our TP of PkR78/share.        .

On an unconsolidated basis, MCB has posted NPAT of PkR11.89bn (EPS: PkR11.75) in 1HCY13 vs. NPAT of PkR11.21bn (EPS: PkR11.07) in 1HCY12, translating into modest 6%YoY growth. This was inline with our expected unconsolidated NPAT of PkR11.61bn (EPS: PkR11.48). Alongside the result, a PkR3.5/share dividend was announced, bringing 1HCY13 payout to PkR7/share. In 2QCY13 alone, MCB posted NPAT of PkR6.12bn (EPS: PkR6.05), up 6%QoQ.

Key highlights of 1HCY13 results included 1) higher than expected 10%YoY decline in NII, 2) higher than expected provisioning reversals of PkR1.3bn, 3) 12%YoY growth in non-interest income primarily driven by higher capital gains and 4) a 4%YoY decline in non-interest expenses.

We flag that strong performance in 2QCY13 is largely a function of provisioning reversals, one-off capital gains (likely disposal of ULEVER stake) and apparent high PF writebacks. In this regard, 2HCY13 results are likely to be sequentially lower before earnings rebound in CY14F on an interest rate uptick. At current levels, MCB trades at a CY13F P/B of 2.6x, P/E of 13.6x and D/Y of 4.8% where our TP of PkR225/share implies 23% downside.