Inter Market Perspective

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1 Inter Market Perspective Research Entity Number REP 085. Tariq Glass Limited TGL: Growth prospects to unlock premium valuations; Buy We initiate coverage on Tariq Glass (TGL) one of Pakistan s leading glass manufacturers with a Buy rating and TP of PkR120/sh, which offers an attractive upside of 33%. TGL is well leveraged to the Pakistan infrastructure up cycle; we estimate a 3yr (FY16F 19F) sales CAGR of 14% led by CPEC led infrastructure activities and resolution of TGL s supply chain bottlenecks. Game changing energy mix shift from imminent commissioning of 10.5MW RFO based power unit and more reliable gas supply courtesy LNG imports is likely to unlock fast track growth with margins leaping to all time high levels, in our view. Strong glass demand and preference for TGL s brand further bolster the case for swift growth. We expect TGL to trade at premium valuations (FY17F P/E of 7.6x is at a sharp discount of 19%/26% to the KSE 100/IMS Cement Universe), as its earnings growth become more visible. We build dividends from FY19F onwards; earlier payouts are possible but dependent on whether the company diversifies into other product categories (pharma/beverage bottles), which continues to see double digit growth. Well leveraged to Pakistan s infrastructure up cycle We initiate coverage on Tariq Glass Ltd (TGL) with a Buy rating and TP of PkR120/sh, which offers a compelling potential upside of 33%. We base our rating on 3yr earnings CAGR of 21%. Being one of the largest glass producer in Pakistan, TGL is well placed to benefit from the unfolding infrastructure boom in Pakistan, with an added impetus from materialization of CPEC. A leading indicator already exists local cement dispatches were up 17%YoY in FY16, which are yet to fully translate into sales growth of float glass, in our view (glass is used at the end of construction). We believe the stage is set for TGL to realize strong growth from robust demand and resolution of its own supply chain bottlenecks. The latter is underpinned by (i) commissioning of 10.5MW RFO power facility from Aug 16; (ii) refurbishment and capacity enhancement of Tableware furnaces; and (iii) regular gas supply courtesy LNG imports. Margin sustenance at highs is a realistic possibility Favorable energy mix changes abound post FY16 first, TGL will overcome its complete dependence on intermittent power supply from national grid and expensive HSD for internal generation; second, regular gas supply amid LNG imports is likely to unlock the long pending earnings growth potential. Though the shift in energy mix makes the company more susceptible to changes in international oil prices, we believe strong pricing power with established Tableware brand names like Toyo Nasic and superior quality float glass will sustain margins in the medium term. Beside, IMS assumptions for oil prices do not surpass US$65/bbl before 2019F. We expect GMs for FY16F/17F to clock in at 23.4%/23.6%YoY even after assuming increase in both oil and gas prices. Worthy of premium valuations TGL trades at a FY17F P/E of 7.6x, which implies an unjustifiable discount of 19% to the KSE 100, particularly as our expected 3 yr NPAT CAGR of 21% comfortably outpaces broader Index growth. Earnings surprise can emanate from oil prices continuing to decline (further below US$40/bbl), gas price hikes stay gradual and cement demand supersedes our anticipation. Risks: (i) High sensitivity to oil prices, but downside can be limited given strong pricing power in float glass segment, (ii) gas price hike, which may be gradual as we move closer to elections, (iii) stiff competition from Chinese imports in the tableware category, and (iv) deferred tax liabilities of PkR2/sh can curb earnings growth in the near term. 01 September 2016 Abdul Ghani Fatani abdul.ghani@imsecurities.com.pk Ext. 305 Tariq Glass Industries Limited Price (PkR/sh)* 90.5 TP (PkR/sh) Stance Buy Upside 32.6% Bloomberg / Reuters TGL PA / TAGS.KA Mkt Cap (US$mn) wk Hi Low (PkR/sh) m Avg. Daily Vol ('000 shrs) 180 3m Avg. Traded Val (US$mn) 0.15 *30th Aug, 2016 Key Ratios FY15A FY16F FY17F FY18F EPS (PkR) EPS Growth (%) n.m 53.3% 40.9% 13.7% P/E (x) P/B (x) P/S (x) GP Margin 20.1% 23.4% 23.6% 22.8% TGL vs. KSE100 Index 25% 13% 0% 13% 25% 38% Aug 15 Oct 15 Source: IMS Research Dec 15 TGL Jan 16 Mar 16 May 16 Jun 16 KSE100 Index Aug 16 Analyst certification and required disclosures begin on page 10 & 11 To find our Research on Bloomberg, please type - IMKP <GO>

2 Company Profile Tariq Glass Ltd (TGL) is one of Pakistan s leading manufacturers of float glass (used in real estate properties) and tableware glass (includes water sets, jugs, etc.), with a combined production capacity of 830tpd. The Lahore based company enjoys strong brand equity in both the Float and Tableware glass categories with established quality household brand names like Toyo Nasic, Omroc, Nova and Tariq Float. The company s sales are mainly concentrated in Pakistan (85% contribution), followed by exports primarily to India and Afghanistan. Close to half of the company s equity stake is owned by Tariq Baig (CEO), Omer Baig (Director) and associated company (Omer Glass Industries Ltd.). Float glass capacity of 550tpd came online in FY14, allowing TGL to diversify itself beyond Tableware glass Commencement of operations 1978 Geographic presence Pakistan, India & Afghanistan Float glass market share Approx. 50% Net sales (PkRmn) 9MFY16 6,045 Total assets (PkRmn) 9MFY16 7,929 Total Liabilities (PkRmn) 9MFY16 4,454 Total market capitalization (PkRmn) 6,340 Shareholding Pattern CEO Tariq Baig 20.0% Directors 20.9% Associated companies 10.5% Financial institutions 7.5% General public 16.6% Others 24.5% Source: Company Accounts Revenue breakup Segment wise Key Ratios FY17F FY16F FY15A FY14A FY13A Sales growth YoY 24.8% 3.8% 3.7% 99.4% 14.0% Gross margin 23.6% 23.4% 20.1% 14.5% 15.1% EBITDA margin 18.9% 20.3% 15.5% 10.8% 11.8% Net margin 8.5% 7.5% 5.1% 0.2% 9.4% Leverage ratio 1.94x 2.33x 2.78x 3.30x 3.03x Cash per share (PkR) Inventory turnover (x) Current ratio (x) Acid test ratio (x) Source: Company Accounts & IMS Research Revenue breakup Geographic 2% 2% 11% 37% 63% 85% Source: Company Reports Tableware Float Source: Company Reports Pakistan India Afghanistan Others

3 Well leveraged to the Pakistan growth story Our market survey suggests TGL s float glass is the preferred brand in Pakistan its market share is approximately 50%. Since glass consumption normally occurs at the end of construction, we expect all of the recent cement sales to transpire into similar glass sales TGL is well placed to benefit from the unfolding infrastructure boom in Pakistan, which may accelerate with the commencement of CPEC projects going forward. With (i) approximate market share of 50% in the Float glass category, (ii) pricing power led by superior brand name, and (iii) resolution of supply bottlenecks, we believe TGL is set to easily ramp up sales by a 3yr CAGR of 14%. A leading indicator already exists cement sales surged by 17%YoY in FY16, which is yet to translate into higher float glass sales. In float glass category, competition is majorly contained to Ghani Glass Ltd (GHGL), which has lost significant market share to TGL, as Chinese supply remains relatively expensive. However, in the Tableware segment, stiff competition from Chinese brands is a dampener. Float glass sales to replicate local cement dispatches Tariq Glass is set to capitalize on the ongoing construction boom, which has already pushed cement sales to all time high levels. We flag that while there is a strong correlation between cement and float glass sales, the latter has yet to pick up commensurately. As per market survey, TGL is the preferred float glass brand in Pakistan, which not only places the company above competitors to benefit from private commercial and residential project led demand growth but also ensures high pricing power. With CPEC coming into play, and additional 34% cement capacity expansion (15 16mn tons) expected in the next few years, the push for robust float glass sales is clear. Our estimates suggest cement sales are likely to grow by a conservative 10 12% on average in the next few years, with room for positive surprises. Since glass consumption normally occurs at the end of construction cycle (that of steel rebar and cement typically in the beginning), we expect all of the recent cement sales to transpire into similar glass sales. Also, from our discussions with glass producers and dealers, we understand glass consumption in buildings are on the rise, which is purely the effect of greater urbanization (our expectation of average GDP growth over FY16 20 is 1.5% higher than in the previous five years). Furthermore, housing credit is growing at an 8yr high rate of 20%YoY, backed by multi decade low interest rates. Though housing credit s contribution to the construction cycle is minimal, we expect its support to extend in the medium term as interest rate uptick is expected to be gradual, in our view. Robust cement sales a leading indicator for float glass % 80 20% 60 10% 40 0% 20 10% 20% FY92 FY94 FY96 FY98 FY00 FY02 FY04 FY06 FY08 FY10 FY12 FY14 FY16 FY18 FY20 Cement Prod (mn tons) Surplus Cap Local disp gr Rhs Source: APCMA & IMS Research supported by housing credit, growing at 20%YoY 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 Source: SBP Jun 07 Dec 07 Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 June 12 Dec 12 June 13 Dec 13 June 14 Dec 14 June 15 Dec 15 Jun 16 Housing credit PkRmn Chg YoY Rhs 40% 30% 20% 10% 0% 10% 20% 3 P age

4 Tableware capacity upgradation and expansion Since FY15, TGL has expanded its tableware glass capacity by 27% to 280tpd, allowing it to capitalize on the robust growth in demand and increase market share. According to SBP data, tableware imports posted a staggering 49%YoY increase in FY16, partly because of supply shortfall from TGL, but majorly on account of growing demand led by rise in the number of newly constructed real estate properties and rise in per capita income and thus consumption. Further impetus may arise from recent changes to real estate valuation/taxation which may curb land speculation while encouraging genuine investment leading to construction, in our view. Tableware glass imports on the rise in US$000 2,000 1,500 1, TGL Float Glass capacity online/refurbishment & expansion of tableware furnace with support from uptick in household consumption US$ 1, % 10.0% 5.0% 0.0% 5.0% Jan 06 Sep 06 Jun 07 Mar 08 Dec 08 Sep 09 Jun 10 Mar 11 Dec 11 Sep 12 Jun 13 Mar 14 Nov 14 Aug 15 May Household Consumption Lhs Pak Chg. YoY Float Glass Tableware India Chg. YoY Bangladesh Chg. YoY Source: SBP Source: World Bank Product diversification Is TGL next in queue? Product diversification and capacity expansions are on the rise in the local Glass sector, with Ghani Glass Ltd. (GHGL) setting up a new Pharma glass furnace and Balochistan Glass joining hands with Chinese Globallink to install a manufacturing facility of glass tubes. GHGL s revenue from Pharmaceutical bottles climbed up by 76%YoY in FY15, with momentum set to extend in the medium term. Interest in the Beverage bottle space is another realistic possibility, with local beverage sales growing by 18% on average over the last 3 years; and stimulus likely from improved rural incomes going forward. Though TGL has not yet announced plans on introducing any new product category, we believe that a move towards product diversification into growing sectors like Pharmaceuticals and Beverage bottles can unlock further earnings growth and rerating potential. Ghani Glass Limited (GHGL) Ghani Value Glass (GGGL) Sales Growth 9MFY16 3.9%YoY 33.1%YoY Gross Margin 9MFY % (up 5.2ppt YoY) 12.3% NPAT Growth 9MFY % YoY 107.3% YoY Products Float Glass, Beverage bottles, and Pharmaceutical bottles Mirror & Tempered Glass Total Assets (PkRmn) 13, Source: Company Accounts 4 P age

5 Inefficient power mix previously Source: IMS Research 20% 80% WAPDA HSD Significant per unit cost saving from shifting to FO from HSD/WAPDA (PkR/kwh) FY16 FY17F FO HSD WAPDA Savings of estimated 10% per unit cost of electricity by moving completely on to FO based generation in FY17F Favorable energy mix to ensure higher margins Historically, energy constraints have proved to be a severe bane for TGL, with the company suffering from acute gas shortages during winters. Now, with favorable energy mix shift in hand, underpinned by a 10.5MW FO based power facility coming online in Aug 16 and gas supply normalizing courtesy LNG imports in the country, the platform is in place to unlock TGL s true earnings potential. Going forward, as TGL remains the preferred brand in the market, pricing power in the float glass category is likely to majorly support margin sustenance, in our view. In house power generation to push margins up Historically, TGL s reliance on the national grid and expensive HSD has inhibited it from cost effectively capitalizing on growing demand prospects. With the commissioning of 10.5MW RFO power facility by the end of Aug 16 as per management, TGL is set to meet its complete electricity requirement (i.e. around 6MW) through in house power generation, which can lead to savings of at least 10% per unit in FY17, in our view. This would resultantly unlock not only production upside potential, but also higher margins. Gross margin during 3QFY16 clocked in at an all time high of 24.4% despite TGL not having one of its tableware furnace fully operational. We conservatively expect gross margins to clock in at 23.6% in FY17F, with room for positive surprises if FO prices consolidate at current levels. This can consequently push earnings beyond our estimated PkR12.01/share (up 41%YoY). Downside risks like rebound in international oil prices and stiff competition from Chinese tableware glass imports in the Tableware segment can keep margins in check, but pricing power in the Float glass category can limit downside. Internally producing power may not be as cost inefficient as in the past, compared to gas and coal, in our view. Note furnace oil prices have more than halved since FY14, from PkR78,610 to PkR32,146 per ton, and are likely to remain low in the next three years based on the depressed outlook for crude oil prices (Bloomberg consensus show oil prices of US$65/bbl in 2020, compared to over US$100/bbl before the plunge). Domestic gas may continue to follow a divergent trend since the onset of oil prices rout. This is supported by (i) ramp up of more expensive LNG imports to the overall gas supply in Pakistan; and (ii) conversion of a number of large gas fields to 2012 Petroleum Policy (for instance, Sui). Resolution of supply bottlenecks to unlock EPS growth Natural gas, a major input for glass furnace, has always served as a major constraint to production for TGL. With LNG now part of the system, TGL has now overcome a major supply bottleneck, which will allow the company to raise its production by an estimated 23%YoY in FY17, in our view. On the flipside, use of imported LNG and FO makes the company more susceptible to changes in the oil prices. Our sensitivity analysis suggests an impact of 0.6% on earnings for every 1% change in FO price from our base case level, assuming the impact is not passed on beyond our sale price increase assumption. On account of the above mentioned supply bottlenecks, TGL had failed to capture investor confidence with earnings growth not depicting its true potential despite gamechanging entry into the float glass category. This is now set to change as our projected EPS growth of 41%/14%YoY for FY17/18F is likely to comfortably outpace that of the Oil & Banks driven KSE 100 Index. 5 P age

6 Sustainably high gross margins amid energy mix change 250, % 100% 200, , ,000 50, % 20.0% 15.0% 10.0% 5.0% 80% 60% 40% 20% FY08 FY09 FY10 FY11 FY12 FY13 FY14 Production (tons) Source: Company Accounts & IMS Research FY15 FY16F FY17F FY18F FY19F GP Margin 0.0% 0% FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 Fuel & Power RM Depreciation Others Gross profit Source: Company Accounts & IMS Research Supply bottlenecks have significantly alloyed Gas supply issue Closure of Tableware Furnace I Closure of Tableware Furnace II Insufficient power supply Our Comments Historically, the company was receiving only 50% of its total gas requirement. With LNG coming into play, we have assumed 80% supply of gas to run the glass furnaces, with room for positive surprises. TGL announced closure of its Tableware Furnace I, having a capacity of 110tpd. The furnace became operational in 1QFY16, with an upgraded capacity of 140tpd. Closure of Tableware Furnace II followed on account of the same reasons. The furnace became operational in 4QFY16, with an enhanced capacity of 140tpd. Combined tableware capacity is now 280tpd. Electricity load shedding in Punjab continues, with TGL (i) being inhibited from operating at optimal capacity, and (ii) rely on HSD generators, thus dragging down margins. With commissioning of FO power facility, we believe the company is set to achieve higher capacity utilization levels. Sensitivity analysis (assuming no changes to selling price) Scenario EPS FY17F Furnace oil Soda Ash Gas price (PkR) (PkR/ton) (PkR/ton) (PkR/mmbtu) Base Case ,557 32, Case A ,000 33, Case B ,000 34, Case C ,000 34, P age

7 Assumptions Rf rate 8.0% Equity Risk Premium 6.0% Adjusted Beta 1.13 Cost of equity 14.8% Cost of debt 10.1% Effective tax rate FY17F 25.6% WACC 11.0% Worthy of premium valuations We have valued TGL using discounted FCFF methodology, where we assign a TP of PkR120/share, which offers a compelling upside of 32%. The stock is currently trading at FY17F P/E of 7.6x (EPS CAGR: 21%; PEG of 0.36x) and P/S of 0.6x (3yr sales CAGR of 14%), which is an unjustifiable 19%/26% discount to the KSE 100/Cement sector (ex. FCCL) despite better growth prospects, in our view. The stock demands premium valuation, in our view, as substantiated by our projected 21% 3 year NPAT CAGR, attributed to (i) higher capacity utilization levels, (ii) improved margins, and (ii) consistent deleveraging. FCFF Valuation (PkRmn) FY17F FY18F FY19F FY20F FY21F FY22F FY23F FY24F FY25F FY26F Net Income 882 1,003 1,101 1,141 1,176 1,205 1,230 1,247 1,270 1,277 Depreciation Increase in WC assets Increase in WC liabilities Increase in other assets Increase in other liabilities (5) (5) (5) (5) (4) CFO 733 1,128 1,236 1,332 1,335 1,300 1,249 1,240 1,214 1,167 Capex Interest (1 T) FCFF 652 1,161 1,244 1,309 1,278 1,191 1,110 1,040 1,164 1,092 DCFs 652 1,047 1, Terminal Value 13,657 Present Terminal Value 3,942 Total Value 11,191 Less: Present value of debt 2,931 Add: Cash 540 Equity Value 8,799 Outstanding number of shares (m) 73.5 Implied Value Per Share FCFE (PkR/share) TGL vs. IMS Cement Universe (P/E Comparison) (x) Jan 14 Feb 14 Apr 14 May 14 Jun 14 Aug 14 Sep 14 Nov 14 Dec 14 Feb 15 Mar 15 May 15 Jun 15 Aug 15 Sep 15 Nov 15 Dec 15 Feb 16 Mar 16 May 16 Jun 16 Aug 16 Source: IMS Research TGL IMS Cement Universe Deleveraging will improve risk profile In our view, TGL s risk profile will improve significantly in the medium term, not only because they will have mitigated operational bottlenecks, but also higher profitability will enable swift deleveraging. We expect Debt to Capital to improve from 59% in FY15 to 33% in FY18F. This in turn will pave the way for payouts; it is worth mentioning that TGL has paid dividends in the past. Thus an improved risk/reward profile will enable the stock to achieve premium valuations. Our target P/E and P/S are 10x and 0.8x respectively. 7 P age

8 Risks Greater susceptibility to changes in oil prices TGL s margins are now more exposed to changes in international oil prices with complete reliance on FO power facility and use of imported LNG (13.37% of Brent plus other charges). That said, we believe the company has the pricing power in the float glass category, but pressure in the tableware segment amid strong competition from Chinese imports can limit complete pass down of any increase in cost. Gas price hike Natural gas remains a major source of energy for the company s glass furnaces. As mentioned above, we think gas prices are skewed on the upside given greater contribution of LNG to overall supply and conversion of prices of large gas fields to 2012 Petroleum Policy. Our estimates suggests that for every 1.0% increase in gas price increase, earnings are likely to take a hit of roughly 1.1%, assuming the impact is not passed on in the form of higher prices. Increase in Soda Ash prices Soda Ash constitutes 16% of the raw material requirement to make glass. Price of Soda Ash has remained fairly stable historically, but it is worth noting that ICI Pakistan dominates the market with 70% share and can raise prices in future. Also, according to TGL, cheaper alternatives (imports from Kenya as done by GHGL) does not meet their quality requirements. For every 1% increase in soda ash prices, TGL s earnings are likely to be affected by 0.8%, in our view, assuming impact is not passed down. Stiff competition from Chinese imports Tableware glass import from China is on the rise, which could potentially limit pricing power of TGL in this segment, but respite can from strong brand equity the company enjoys in the float glass category. A favorable custom duty on the same in future cannot be ruled out. Rise in interest rate Although not significant, but a rise in interest rate could lead to higher financing cost as the company remains highly leveraged (FY16F D/E: 1.2x). This risk is, however, limited for a year or so until most of the financial obligations are paid off. Higher effective tax rate Nearly 85% of the company s sales are driven by local demand, with the rest being exported to India and Afghanistan. Our sensitivity analysis suggests that for every 1% increase in geographic concentration towards Pakistan, in light of rising local demand, rise in effective tax rate could reduce earnings by 0.6% as taxes are higher on local sales. Other than this, deferred tax liabilities of PkR143.9mn (PkR2/share) may also limit earnings growth potential in the near term. 8 P age

9 Tariq Glass Limited Financial Snapshot FY14A FY15A FY16F FY17F FY18F Net Sales 7,756 8,040 8,345 10,418 11,362 Cost of Sales 6,630 6,426 6,395 7,960 8,776 Gross Profit 1,127 1,614 1,950 2,458 2,586 Selling and Distribution Admin expenses EBITDA 836 1,247 1,692 1,964 1,992 Depreciation and Amortization EBIT ,243 1,532 1,597 Finance Cost Other Operating Income Other charges Profit Before Tax ,186 1,356 Taxation Profit After Tax ,003 Key Ratios FY14A FY15A FY16F FY17F FY18F EPS (PkR) (0.24) EPS Growth (%) 104.7% n.m 53.3% 40.9% 13.7% P/E (x) n.m P/B (x) P/S (x) GP Margin 14.5% 20.1% 23.4% 23.6% 22.8% EBITDA Margin 11% 16% 20% 19% 18% Interest coverage Effective tax rate 211% 13% 29% 26% 26% Net profit margin 0.2% 5.1% 7.5% 8.5% 8.8% Current ratio Leverage Non Current Assets FY14A FY15A FY16F FY17F FY18F Property plant and equipment 4,462 4,233 4,013 3,881 3,586 Intangible assets Long term deposits Total non current assets 4,511 4,285 4,065 3,932 3,637 Current Assets Stores spares and loose tools Stock in trade 1,229 1,261 1,279 1,636 1,803 Trade debts ,090 Loans and advances Cash Total current assets 3,078 3,237 3,688 4,244 4,629 Total Assets 7,590 7,522 7,753 8,176 8,267 TGL Forward P/E Band (x) (PkR) (x) Non current Liabilities FY14A FY15A FY16F FY17F FY18F Long term finances secured 1,467 1, Liabilities against assets subject to fin. lease Long term deposit Deferred Taxation Long term advance unsecured Total non current liabilities 1,866 1,469 1, Jan 14 Mar 14 Jun 14 Aug 14 Source: IMS Research Nov 14 Jan 15 Apr 15 Jul 15 Sep 15 Dec 15 Mar 16 May 16 Aug Current liabilities Trade & Other payables Accrued Interest/Markup Short term borrowings 1,843 1,900 1,955 1,555 1,355 Current portion of long term liabilities Provision for taxation 4 Total current liabilities 3,069 2,997 2,949 2,652 2,368 TGL P/S Band (x) (x) Paid up capital Share premium Equity portion of shareholders' loan Unappropriated Profit 985 1,422 2,048 2,930 3,932 Total Equity 2,299 2,702 3,327 4,209 5,212 Surplus on revaluation of PPE Total Liabilities and Equity 7,590 7,522 7,753 8,176 8,267 Jul 10 Nov 10 Apr 11 Sep 11 Feb 12 Jul 12 Source: IMS Research Dec 12 May 13 Oct 13 Mar 14 Aug 14 Jan 15 Jun 15 Nov 15 Mar 16 Aug P age

10 I, Abdul Ghani Fatani, certify that the views expressed in the report reflect my personal views about the subject securities. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations made in this report. I further certify that I do not have any beneficial holding of the specific securities that I have recommendations on in this report. Ratings Guide* Total Return Buy More than 15% Neutral Between 0% 15% Sell Below 0% *Based on 12 month horizon unless stated otherwise in the report. Total Return is sum of any Upside/Downside (percentage difference between the Target Price and Market Price) and Dividend Yield. Valuation Methodology: We use multiple valuation methodologies in arriving at a Target Price including, but not limited to, Discounted Cash Flow (DCF), Dividend Discount Model (DDM) and relative multiples based valuations. Risks: Please refer to page no. 8 Disclaimer: Intermarket Securities Limited has produced this report for private circulation only. The information, opinions and estimates herein are not direct 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 Intermarket Securities Limited to any additional registration or licensing requirement within such jurisdiction. The information and statistical data herein have been obtained from sources we believe to be reliable where such information has not been independently verified and we make no representation or warranty as to its accuracy, completeness and correctness. This report makes use of forward looking statements that are based on assumptions made and information currently available to us and those are subject to certain risks and uncertainties that could cause the actual results to differ materially. No part of the compensation of the author(s) of this report is related to the specific recommendations or views contained in this report. This report is not a solicitation or any offer to buy or sell any of the securities mentioned herein. It is meant for information purposes only and does not take into account the particular investment objectives, financial situation or needs of individual recipients. Before acting on any information in this report, you should consider whether it is suitable for your particular circumstances and, if appropriate, seek professional advice. Neither Intermarket Securities Limited nor any of its affiliates or any other person associated with the company directly or indirectly accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or the information contained herein. Subject to any applicable law and regulations, Intermarket Securities Limited, its affiliates or group companies or individuals connected with Intermarket Securities Limited directly or indirectly may have used the information contained herein before publication and may have positions in, or may from time to time purchase or sell or have a material interest in any of the securities mentioned or may currently or in future have or have had a relationship with, or may provide investment banking, capital markets and/or other services to, the entities mentioned herein, their advisors and/or any other connected parties. 10 P age

11 NOTICE TO US INVESTORS This report was prepared, approved, published and distributed by Intermarket Securities Limited (IMS) located outside of the United States (a non US Group Company ). This report is distributed in the U.S. by LXM LLP USA, a U.S. registered broker dealer, on behalf of IMS only to major U.S. institutional investors (as defined in Rule 15a 6 under the U.S. Securities Exchange Act of 1934 (the Exchange Act )) pursuant to the exemption in Rule 15a 6 and any transaction effected by a U.S. customer in the securities described in this report must be effected through LXM LLP USA. Neither the report nor any analyst who prepared or approved the report is subject to U.S. legal requirements or the Financial Industry Regulatory Authority, Inc. ( FINRA ) or other regulatory requirements pertaining to research reports or research analysts. No non US Group Company is registered as a broker dealer under the Exchange Act or is a member of the Financial Industry Regulatory Authority, Inc. or any other U.S. self regulatory organization. Analyst Certification. Each of the analysts identified in this report certifies, with respect to the companies or securities that the individual analyses, that (1) the views expressed in this report reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly dependent on the specific recommendations or views expressed in this report. Please bear in mind that (i) IMS is the employer of the research analyst(s) responsible for the content of this report and (ii) research analysts preparing this report are resident outside the United States and are not associated persons of any US regulated broker dealer and that therefore the analyst(s) is/are not subject to supervision by a US broker dealer, and are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with US rules or regulations regarding, among other things, communications with a subject company, public appearances and trading securities held by a research analyst account. Important US Regulatory Disclosures on Subject Companies. This material was produced by Analysis of IMS solely for information purposes and for the use of the recipient. It is not to be reproduced under any circumstances and is not to be copied or made available to any person other than the recipient. It is distributed in the United States of America by LXM LLP USA and elsewhere in the world by IMS or an authorized affiliate of IMS. This document does not constitute an offer of, or an invitation by or on behalf of IMS or its affiliates or any other company to any person, to buy or sell any security. The information contained herein has been obtained from published information and other sources, which IMS or its Affiliates consider to be reliable. None of IMS accepts any liability or responsibility whatsoever for the accuracy or completeness of any such information. All estimates, expressions of opinion and other subjective judgments contained herein are made as of the date of this document. Emerging securities markets may be subject to risks significantly higher than more established markets. In particular, the political and economic environment, company practices and market prices and volumes may be subject to significant variations. The ability to assess such risks may also be limited due to significantly lower information quantity and quality. By accepting this document, you agree to be bound by all the foregoing provisions. LXM LLP USA assumes responsibility for the research reports content in regards to research distributed in the U.S. LXM LLP USA or its affiliates has not managed or co managed a public offering of securities for the subject company in the past 12 months, has not received compensation for investment banking services from the subject company in the past 12 months, does not expect to receive and does not intend to seek compensation for investment banking services from the subject company in the next 3 months. LXM LLP USA has never owned any class of equity securities of the subject company. There are not any other actual, material conflicts of interest of LXM LLP USA at the time of the publication of this research report. As of the publication of this report LXM LLP USA, does not make a market in the subject securities. 11 P age