Index & Volume Chart. (Index) 40,994 41,429 41,800 41,661 41,700

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1 AKD Equity Research / Pakistan AKD Research research@akdsecurities.net Indices KSE-100 KSE-30 This week 41,661 19,959 Last week 41,389 19,880 Indices KMI-30 Allshare This week 71,304 30,020 Last week 71,271 29,935 Mkt Cap. PkRbn US$bn This week 8, Last week 8, Avg. Daily Turnover ('mn shares) This week Last week Change 8.58% Weekly Review KSE-100 Index remained range bound throughout the week touching a low of 40,994pts before closing at 41,661pts (+0.66%WoW). We witnessed a weak start of the week as uncertainties around the Chinese package and materialization of Saudi package amid IMF negotiations kept investors on the err side of caution. However, bulls mustered strength in the latter part of the week to give a positive close, not giving a not-so-subtle salute to MSCI Review. To highlight, MSCI on Nov announced its semi-annual review where it declassified LUCK and UBL from the Standard Index to Small Cap Index and downgraded HCAR and MLCF from the EM index. Consequent to exclusion of LUCK and UBL, Pakistan s weight has been reduced to 0.4% in the MSCI EM index from 0.7% in May 18. Market activity remained strong with ADT standing at 213.3mn shares vs mn shares in the previous week as local participants bounced on cheap valuations. ADTV for the week stood at US$88.9mn vs. US$77.9mn in the previous week. A closer look suggests activity to have been tilted towards the main board with ADTV of KSE-100 Index/KSE- All share Index at 81.4% (30W high) vs. 73.2% recorded in the previous week. Top five weekly gainers (AKD Universe) are, 1) PIOC (+17.64%), 2) CHCC (+10.38%), 3) PSMC (+6.99%), 4) MCB (+4.69%), and 5) HBL (+4.16%), while the losers (AKD Universe) are, 1) PPL (-2.26%), 2) HASCOL (-2.47%), 3) PTC (-3.08%), 4) KEL (-3.29%), and 5) ASTL (-4.44%). Index & Volume Chart Universe Gainers & Losers Top-5 Volume Leaders Symbol Volume (mn) LOTCHEM : STPL : TRG : PAEL : PIBTL : (Shrs'000) 250, , , ,000 50,000 - (Index) 40,994 41,429 41,800 41,661 41,700 41,096 41,152 41,600 41,500 41,400 41,300 41,200 41,100 41,000 40,900 40, Nov 13-Nov 14-Nov 15-Nov 16-Nov Ready Volume (LHS) KSE100 Index (RHS) 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% PIOC CHCC PSMC MCB HBL PPL HASCOL PTC KEL ASTL (share mn) Jan-18 Mar-18 May-18 Oct-18 Volume (LHS) KSE-100 Index (Index) 46,000 44,000 42,000 40,000 38,000 36,000 Source: PSX & AKD Research Source: PSX & AKD Research Outlook News flows relating to IMF negotiations (to be completed by Nov 20 18), likely disbursement of US$1bn from Saudi authorities (Out of US$3bn) and PM s visit to UAE for a potential package would drive market performance next week, in our view. We advise investors to take positions in the banking stocks (MPS to be announced in the last week of this month) and switch from Oil stocks amid pressure on Global Oil prices (OPEC basket has corrected 6.3% in the outgoing week). Further, investors could also take positions in sectors that are likely to be the beneficiary of a slowdown in commodity prices. Important disclosures Important disclosures including investment banking relationships and analyst certification at end of this report. AKD Securities 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. AKD Securities TREC Holder & Registered Broker Pakistan Stock Exchange REP-019 Find AKD research on Bloomberg (AKDS<GO>), firstcall.com and Reuters Knowledge Copyright 2018 AKD Securities Limited. All rights reserved. The information provided on this document is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation or which would subject AKD Securities or its affiliates to any registration requirement within such jurisdiction or country. Neither the information, nor any opinion contained in this document constitutes a solicitation or offer by AKD Securities or its affiliates to buy or sell any securities or provide any investment advice or service. AKD Securities does not warrant the accuracy of the information provided herein.

2 This Week s Daily Reports Nov 16, ,800 41,750 41,700 41,650 41,600 41,550 41,500 41,450 41,400 Nov 15, ,460 41,380 41,300 41,220 41,140 41,060 40,980 40,900 Nov 14, ,200 41,150 41,100 41,050 41,000 40,950 40,900 40,850 40,800 40,750 40,700 9:15 9:41 10:07 10:32 10:58 11:24 11:49 12:15 12:40 13:05 13:31 13:56 14:22 14:48 15:13 15:39 16:06 9:30 9:57 10:24 10:51 11:18 11:44 12:11 12:38 9:30 9:54 10:17 10:41 11:05 11:28 11:52 12:15 12:39 13:02 13:26 13:49 14:13 14:36 15:00 15:23 13:04 9:30 9:58 10:24 10:51 11:18 11:45 12:12 12:38 13:05 13:31 13:58 14:25 14:51 15:18 13:31 13:57 14:24 14:51 15:17 9:30 9:53 10:17 10:40 11:04 11:27 11:51 12:14 12:38 13:02 13:25 13:49 14:12 14:36 14:59 15:23 Nov 13, ,370 41,290 41,210 41,130 41,050 40,970 40,890 40,810 40,730 Nov 12, ,560 41,480 41,400 41,320 41,240 41,160 41,080 41,000 Source: PSX & AKD Research Pakistan Economy: Trade imbalance keeps CAD elevated, (AKD Daily, Nov 16, 2018) Latest SBP data on external account paints a not so encouraging picture, with CAD widening by 34%MoM to US$1.218bn in Oct 18. Once again, trade imbalance is the key culprit, where sequential growth in imports (+24%MoM) outpaced growth in exports (+15%MoM). Encouragingly, remittances have staged strong recovery backed by higher inflows from USA (+34%MoM/43%YoY), UK (+47%MoM/10%YoY) and GCC (+39%MoM/13%YoY). While we continue to stick with our earlier CAD estimates (FY19F CAD: 5.4% of GDP), recent price trends in commodities particularly energy complex are encouraging, where continuation of the same should ease pressures on the external front. GoP s multipronged strategy to plug the net financing gap has worked well so far, considering assurance of support from two friendly countries (i.e. Saudi Arabia & China). Assuming US$6bn from Kingdom and further US$3bn inflows from China, our estimated net financing gap for next two years comes at ~US$8bn (vs. previously US$13.5bn), cutting our reliance on a bailout from the IMF to US$6-8bn. Pakistan Commodities: Oct'18 Commodities Review (AKD Daily, Nov 15, 2018) Global commodity markets treaded lower (TRJ index falling 2.2%MoM) with almost all major commodity classes witnessing price declines over the month. Lower crude oil prices (Brent/Arab Light prices down 11/7%Mom) and Coal (down 1.3% MoM) kept energy commodities soft, while Cotton and Steel benchmarks depicted similar trends where sentiments in these markets erred on the side of weakening global demand driving prices lower. Moreover, heightening tensions from global trade tussles, particularly between the US and China, cloud global growth outlook with noticeable declines in global consumer confidence and moderating PMI data, depressing bullish sentiment in global commodity markets. In this backdrop, Pakistan's domestic import bill could be headed for some much-needed relief, where our calculations show a US$5/bbl decrease in global oil prices reduces the import bill by US$1.1bn (rising quantum LNG imports are also pegged to crude), where a continuation of this trend may ease near term macro-concerns, offering a window for consolidating economic fundamentals. MSCI: Market gives a not-so-subtle salute!, (AKD Daily, Nov 14, 2018) Blimey! The MSCI has retained Pakistan s status as an Emerging Market - locals had hoped against hope for a downgrade. That said, UBL and LUCK have been downgraded to small caps from previous EM Standard while MLCF and HCAR have unexpectedly been deleted from the Small Cap Index. Pakistan s weight is estimated to have fallen to 0.04% versus previous 0.07%. Whether the insignificant weight in EM leads to consultations for a downgrade remains to be seen. With the next leg in market performance likely to be dictated by locals, we believe eyeing events such as funding packages from the Chinese and Saudia as well as negotiations with the IMF take precedence over MSCI changes a view corroborated by today s performance with the market giving a not so subtle salute. Current valuations have already priced in MSCI changes in our view, with UBL and LUCK having already shed 15.8% and 17.3%, respectively over the past 3M. Moving ahead, we believe addressing of Pakistan s external imbalances remains the key to unlocking performance. Top picks include Banks (HBL, UBL, BAFL) and Textiles (NML, GATM) while we also like LUCK, HUBC and ASTL. Pakistan Auto_Oct'18 sales are a much-needed lift, (AKD Daily, Nov 13, 2018) Total automotive industry sales grew +28%MoM/+6%YoY during Oct'18, amounting to 25,508 units, taking cumulative 10MCY18 sales to 225,742 units (+9%YoY), where constituents of total industry sales moved +10%/-11%/-10%/+0%/+9%MoM for Passenger Cars/ LCVs/Trucks/Buses/Tractors, where passenger car sales neared a high-watermark of 21,342 2

3 This Week s Daily Reports units (21,540 units were sold in May'18) owing to a significant strength witnessed in the CC segment (+40%MoM). Cumulative 10MCY18 sales-growth of 9%YoY was an offshoot of Passenger Car/LCVs/Trucks growing 9%/8%/3%YoY, standing in contrast to 4MFY19 sales of +4%/-23%/-1%YoY, confirming our sanguine outlook for passenger car sales, despite dampeners emerging for total industry demand outlook (non-filer ban, rising cost pressures, inflation and oil price spike). Additionally, for the outgoing month PSMC/INDU/HCAR exceeded nameplate monthly capacities operating at 107/154/120% of monthly double-shift capacity taking 10MCY17 utilization levels to 94%/131%/108% vs. 86/124/95% for SPLY. Notification of limited cost pass-on of some OEM variants indicate their capacity to absorb cost escalations (PkR slipped 6.6% during Oct'18), in a bid to encourage off-season buyers. Despite softer margin outlook over the near term, INDU remains our top pick in the space, offering a strong value proposition (FY19 D/Y & P/B of 8.9% and 2.5x), and an unmatched brand premium difficult to replicate for new entrants. OGDC: Investment case updated, BUY!, (AKD Daily, Nov 12, 2018) We update our investment case on OGDC post 1Q results and maintain our BUY stance with a Jun 19TP of PkR180/sh. Commissioning of LPG processing facility at Nashpa and approval from the GOP to sell gas from Jhal-Magsi to 3rd party operators, are likely to support profitability in the short-tomedium run. A major trigger to profitability is the coming online of, i) 106MMCFD of gas and 200bpd of oil unconnected to the system, and ii) FY18 discoveries cumulating into 48MMCFD of gas and 800bpd. The company is perfectly placed to benefit from higher concessions offered by the Government under PP12 on new blocks in frontier regions (~US$2/mmbtu), the bidding of which is likely to begin soon. 3

4 Jan-18 Mar-18 Jul-18 Oct-18 Jan-18 Mar-18 May-18 Jul-18 Jul-18 Oct-18 AKD Securities Limited Regional Valuations (2018) EPS Growth PE(x) Pakistan 19.60% 6.74 Indonesia 9.13% Malaysia 13.64% Philippines 6.40% Vitenam 12.79% India 24.63% China 12.56% 9.66 % ROE Divd Yld Pakistan 15.6% 6.93 Indonesia Malaysia Philippines Vitenam India China Source: AKD Research & Bloomberg PkR/US$ Trend TRJ-CRB Index Source: Bloomberg Source: Bloomberg Major World Indices Performance Country Bloomberg Code WoW CYTD Pakistan KSE100 Index 41,684 41, % 3.3% Srilanka CSEALL Index 5,971 5, % -6.2% Thailand SET Index 1,639 1, % -6.0% Indonesia JCI Index 6,019 5, % -4.7% Malaysia FBMKLCI Index 1,704 1, % -4.2% Philippines PCOMP Index 7,083 6, % -17.0% Vietnam VNINDEX Index % -8.1% Hong Kong HSI Index 26,119 25, % -12.5% Singapore FSSTI Index 3,078 3, % -9.4% Brazil IBX Index 35,504 35, % 12.3% Russia RTSSTD Index 15,937 16, % 17.0% India SENSEX Index 35,451 35, % 4.7% S&P SPX Index 2,730 2, % 1.6% DJIA INDU Index 25,289 25, % 1.8% UK UKX Index 7,038 7, % -7.7% Germany DAX Index 11,354 11, % -12.5% Qatar DSM Index 10,214 10, % 19.8% Abu Dhabi ADSMI Index 5,055 5, % 14.9% Dubai DFMGI Index 2,779 2, % -17.5% Kuwait KWSEIDX Index 6,633 6, % 3.5% Oman MSM30 Index 4,451 4, % -11.8% Saudi Arabia SASEIDX Index 7,662 7, % 6.0% MSCI EM MXEF Index % -15.0% MSCI FM MXFM Index % -17.3% International Major Currencies Commodities Source: Bloomberg SPOT Chg +/- WoW CYTD Dollar Index % 4.67% USD/PkR % 21.28% USD/JPY % 0.34% EUR/USD % -4.95% GBP/USD % -4.74% AUD/USD % -6.58% NZD/USD % -3.57% CHF/USD % 2.80% CAD/USD % 4.70% USD/KRW 1,129 1, % 5.41% CNY/USD % 6.24% Source: Bloomberg SPOT Units WoW CYTD TRJ-CRB Points % -3.89% Nymex (WTI) US$/bbl % -5.01% ICE Brent US$/bbl % -0.06% N. Gas Henry Hub US$/Mmbtu % 58.21% Cotton USd/Pound % -4.52% Gold US$/Tr.Oz % -6.11% Sliver US$/Tr.Oz % % Copper US$/MT % % Platinum US$/Oz % -9.00% Coal US$/MT % -1.05% Source: Bloomberg 4

5 Mar-18 May-18 Jan-18 Mar-18 May-18 Jul-18 Oct-18 AKD Securities Limited Chart Bank Earnings Yield vs. T-Bill (12M) Differential Advance to Decline Ratio (%) Jan-18 Jul-18 FIPI Flows for the week LIPI Flows for the week (US$'000) - (167) Co., 9.85 (2,000) (1,731) (2,748) 8.00 (4,000) (6,000) (8,000) (10,000) (8,517) Ind., 4.46 M.Funds, 4.70 Bank/DFI, 3.38 NBFC, 0.14 Prop. Trading, 2.12 Others, 1.26 (12,000) (10,930) (2.00) (4.00) Ins, (1.81) AKD Universe vs. KSE-100 Index KSE-100 vs. MSCI-EM & MSCI-FM 17% 12% 7% 2% -3% -8% -13% -18% -23% 20% 15% 10% 5% 0% -5% -10% -15% -20% KSE100 MSCI FM MSCI EM KSE-All Share Index AKD Universe 5

6 Jul-07 Jun-08 May-09 May-10 Apr-11 Mar-12 Mar-13 Feb-14 Jan-15 Jan-16 Dec-16 AKD Securities Limited AKD Universe Valuations F 2019F 2020F EPS (PkR) EPS chg (%) 3.82 (5.90) EPS chg (%) ex-e&p (15.73) Book Value per Share (PkR) Payout (%) Valuations Price to Earnings (x) PER (ex-e&p) (x) Price to Book (x) Price to CF (x) Earnings Yield (%) Dividend Yield (%) EV / EBITDA (x) Profitability Return on Equity (%) Return on Assets (%) Chg in Sales (%) (14.06) Gross Margin (%) Operating Margin (%) Net Margin (%) Source: AKD Research Market PER Chart 2018 (x) Source: AKD Research 6

7 AKD Universe Active Coverage Cluster s Valuations Stock Symbol Price TP Stance EPS(PkR) PE(x) PB(x) DY(%) UR Under Review (PkR) (PkR) 17 18F 19F 17 18F 19F 17 18F 19F 17 18F 19F Automobile and Parts Indus Motors INDU 1, , Buy Pak Suzuki Motors PSMC Buy Cements DG Khan Cement DGKC Neutral Lucky Cement LUCK Buy Maple Leaf Cement Factory MLCF Buy Fauji Cement Company Ltd. FCCL Neutral Pioneer Cement Limited PIOC Buy Cherat Cement Co Limited CHCC Buy Gharibwal Cement Ltd GWLC Buy Cable & Electrical Goods Pak Elektron Ltd PAEL Sell Engineering Amreli Steels Ltd. ASTL Buy Fertilizers Engro Corporation ENGRO Sell Engro Fertilizers Limited EFERT Buy Fauji Fert. Bin Qasim Ltd. FFBL Buy Fauji Fertilizer Company FFC Neutral Fatima Fertilizer FATIMA Buy Food Producers Engro Foods Limited EFOODS Sell Oil & Gas Oil & Gas Development Co. OGDC Buy Pak Oilfields POL Buy Pakistan Petroleum PPL Buy Hascol Petroleum HASCOL Buy Attock Petroleum APL Buy Pakistan State Oil PSO Buy Power Hub Power Co. HUBC Buy K-Electric Co. KEL UR UR UR UR UR UR UR UR UR UR UR UR UR UR UR Kot Addu Power Company KAPCO Sell Personal Goods Nishat Mills NML Buy Nishat Chunian Ltd. NCL Sell Banks Allied Bank Limited ABL Buy Bank AlFalah BAFL Neutral Habib Bank Limited HBL Buy MCB Bank Limited MCB Buy National Bank of Pakistan NBP Buy United Bank Ltd UBL Buy Source: AKD Research 7

8 AKD Universe Coverage Cluster s Performance S toc ks S ymbol P ric e Absolute P e rforma nc e (%) 1 Y e a r 1 Y e a r 16 - Nov- 18 1M 3M 6M 12 M CYTD High Low KS E Inde x 4 1, , , Automobile a nd P a rts Indus Motors INDU Pak Suzuki Motors PSMC Ce me nts DG Khan Cement DGKC Lucky Cement LUCK Maple Leaf Cement Factory MLCF Fauji Cement Company Ltd. FCCL Pioneer Cement Limited PIOC Cherat Cement Limited CHCC Gharibwal Cement Limited GWLC Engine e ring Amreli Steel Ltd ASTL Fe rtilize rs Dawood Hercules DAWH Engro Fertilizers Ltd. EFERT Engro Chemical ENGRO Fatima Fertilizer FATIMA Fauji Fert. Bin Qasim Ltd. FFBL Fauji Fertilizer Company FFC Food P roduc e rs Engro Foods Limited EFOODS Ca ble & Ele c tric a l Goods Pak Elektron Limited PAEL Oil & Ga s Oil & Gas Development Co. OGDC Pak Oilfields POL Pakistan Petroleum Ltd. PPL Pakistan State Oil PSO Attock Petroleum Ltd. APL Hascol Petroleum HASCOL P owe r Hub Power Co. HUBC K- Electric Limited KEL Kot Addu Power Company KAPCO P e rsona l Goods Nisaht (Chunian) Ltd. NCL Nishat Mills NML Ba nks Allied Bank Limited ABL Bank AlFalah BAFL Habib Bank Limited HBL MCB Bank Limited MCB National Bank of Pakistan NBP United Bank Ltd UBL Source: PSX & AKD Research 8

9 Economic Snapshot End Month Data Units Jan-18 Mar-18 May-18 Jul-18 Monetary Rates T-Bills - 3M % T-Bills - 6M % T-Bills - 12M % PIB 10Y % KIBOR 6M % Discount rate % Policy rate % Inflation Headline inflation % Core inflation % Food inflation % (0.20) External Indicators Export (PBS) US$ (mn) 1,974 1,977 1,971 1,902 2,231 2,133 2, ,646 2,017 Import (PBS) US$ (mn) 4,898 4,910 5,607 4,797 5,280 5,066 5, ,838 4,992 Trade Deficit (PBS) US$ (mn) (2,924) (2,933) (3,636) (2,895) (3,049) (2,933) (3,670) (3,807) (3,192) (2,975) Export (SBP) 2,546 2,464 2,111 2,059 2,305 2,246 2,266 2,012 2,009 n.a Import (SBP) 5,346 5, ,334 4,943 4,949 5,166 5,133 5,566 n.a Trade Deficit (SBP) (2,800) (2,676) (2,763) (2,275) (2,638) (2,703) (2,900) (3,121) (3,557) n.a Home Remittances US$ (mn) 1,577 1,724 1,639 1,672 1,773 1,651 1,771 1,594 1,929 2,037 Current Account US$ (mn) (1,441) (1,256) (1,617) (1,241) (1,237) (1,947) (2,011) (1,976) (2,200) n.a Banking Sector Deposits PkR (bn) 11,969 12,362 12,002 11,933 12,571 12,277 12,258 13,063 12,551 n.a Advances PkR (bn) 6,280 6,530 6,556 6,629 6,812 6,839 7,046 7,362 7,336 n.a Investments PkR (bn) 8,475 8,542 7,637 8,127 6,853 7,784 6,733 8,179 7,785 n.a W. A. lending rate % n.a W. A. deposit rate % n.a Spread rate % n.a Public Finance Tax collection PkR (mn) 271, , , , , , , ,132 n.a n.a Direct taxes PkR (mn) 98, ,476 95,706 89, ,524 95, , ,441 n.a n.a Indirect Taxes PkR (mn) 172, , , , , , , ,691 n.a n.a Currency Fx Reserves US$ (mn) 18,774 20,154 18,957 18,317 17,796 17,540 15,977 16,407 16,891 16,370 USDPkR - Interbank PkR/USD Source: SBP, PBS & AKD Research 9

10 Analyst Certification We, the AKD Research Team, hereby individually & jointly certify that the views expressed in this research report accurately reflect our personal views about the subject securities and issuers. We also certify that no part of our compensation was, is,or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report. We further certify that we do not have any beneficial holding of the specific securities that we have recommendations on in this report. AKD Research Team Analyst Tel no. Coverage Usman Zahid (693) Executive Director Research Hamza Kamal (603) Banking Ali Asghar Poonawala (646) OMCs & Automobiles Waqas Imdad Ali (634) Cements & Fertilizer Umer Farooq (602) Textiles & Steel Qasim Anwar (680) Technical Analysis Nasir Khan (639) Research Production Tariq Mehmood (643) Library Operations DISCLOSURES & DISCLAIMERS This publication/communication or any portion hereof may not be reprinted, sold or redistributed without the written consent of AKD Securities Limited. AKD Securities Limited has produced this report for private circulation to professional and institutional clients only. The information, opinions and estimates herein are not directed at, or intended for distribution to or use by, any person or entity in any jurisdiction where doing so would be contrary to law or regulation or which would subject AKD Securities Limited to any additional registration or licensing requirement within such jurisdiction. 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