Chemicals ENGRO PA. Company Update Pakistan Research. ENGRO: Missed EFERT's rally?... Don't miss ENGRO

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1 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Chemicals Company Update Pakistan Research : Missed EFERT's rally?... Don't miss PA Price Target: PKR250/Share Closing Price: PKR176.2/Share Key Data 12m Price Range (PKR) Market Cap (PKR mn) 90,080.6 Outstanding Shares (mn) Avg Daily Vol. (mn) (6m) 4.5 1Yr Relative Performance (%) KSE-100 INDEX February 19, 2014 With EFERT having rallied by 88% CYTD, its holding company, up a mere 11% CYTD, offers a much cheaper proxy to strong improvement in EFERT's fundamentals. Driven by revival in its foods (EFOODS) and fertilizer (EFERT) businesses, is set to post robust earnings growth of 45% in CY14, which would be followed by a growth of 58% in CY15. As such, still trades at an attractive CY14 PER of 7.6x while its key growth contributing investments, EFERT and EFOODS, trade at 9.9x and 39.6x respectively. Other key businesses like polymer and power would also sustain earnings growth. We have valued using a conglomerate discount of 25% and arrive at Dec-14 PT of PKR250/sh, which offers an upside of 42% from current levels. Our PT implies exit multiple of 6.8x CY15 earnings which is still cheaper than our index target PER of 8.5x. BUY! Robust earnings growth ahead: Driven by revival in its foods and fertilizer businesses, is set to post robust earnings growth of 45% in CY14, which would be followed by a growth of 58% in CY15. Earnings growth in CY14 would be driven by EFERT while EFOODS revival would also contribute 24% of earnings growth. CY15 earnings growth would primarily be driven by fertilizer as both urea plants will be operational from Jan-15. has underperformed underlying investments: With EFERT having rallied by 88% CYTD, its holding company, up a mere 11% CYTD, offers a much cheaper proxy to improvement in EFERT's fundamentals. As such, still trades at an attractive CY14 PER of 7.6x while its key growth contributing investments, EFERT and EFOODS, trade at 9.9x and 39.6x respectively. Other businesses to sustain earnings: s 56% owned polymer business posted strong profitability growth of 8.2x YoY in CY13. Engro Powergen would also sustain its profits and contribute ~9-20% of s earnings during CY Valuation: Using sum of the parts (SOTP) method we arrive at Dec-14 PT of PKR250/share, which offers an upside of 42%, even after assuming a 25% conglomerate discount for all businesses. Our PT implies exit multiple of 6.8x CY15 earnings which is still cheaper than our index target PER of 8.5x. BUY! Sateesh Balani AC sbalani@elixirsec.com (+92-21) Financial Highlights CY11A CY12A CY13A CY14E CY16E EPS DPS (PKR) BV/share PER (x) Dividend Yield 3% 0% 0% 1% 4% 9% PBR (x) ROA 5% 1% 5% 7% 10% 12% ROE 21% 3% 17% 20% 26% 24% EBITDA growth 111% -10% 35% 6% 30% 8% Net Profit growth 19% -83% 514% 45% 58% 15% Please refer to the last page for Analyst Certification and other important disclosures.

2 Table of Contents Investment Summary 04 Valuation 05 Engro Fertilizers Limited 08 Engro Foods Limited 09 Engro Qadirpur PowerGen 10 Engro Eximp 11 Engro Vopak Terminal 12 Engro Polymer & Chemicals Limited 13 Financials 14 2 Elixir Securities February 19, 2014

3 Engro Corporation Mkt Cap: USD858mn Engro Foods 87% 's share Mkt Cap: USD622mn Engro Polymer 56% 's share Mkt Cap: USD54mn Engro Fertilizer 92% 's share Mkt Cap: USD578mn Engro Eximp 100% Engro Qadirpur PowerGen 10% Engro PowerGen 100% Engro Vopak 50% Engro Qadirpur PowerGen 90% 3 Elixir Securities February 19, 2014

4 1-Jan-14 8-Jan Jan Jan Jan-14 5-Feb Feb-14 Company Update Investment Summary Robust earnings growth ahead, one of the largest conglomerates in Pakistan, provides an ideal exposure to a rapidly growing fertilizer and foods business. Earnings of are estimated to grow by 45% in CY14, which would be followed by 58% growth in CY15. Fertilizer business would drive earnings growth in CY14 as margin expansion, due to concessionary gas pricing, would come into play. EFOODS earnings growth will also remain strong in CY14 due to trough earnings in CY13 and drive 24% of CY14 earnings growth of. CY15 earnings growth would primarily be driven by growth in fertilizer profits as both urea plants will be operational. Utilization of both urea plants is expected to increase to 91% in CY15 from 63% in CY14 as gas supply from Kunnar Pasakhi Deep would commence from Jan-15. CY15 earnings of Engro Fertilizers would likely grow by a whopping 87% YoY and clock in at PKR13bn. has underperformed underlying investments With EFERT having rallied by 88% CYTD, its holding company, up a mere 11% CYTD, offers a much cheaper proxy to strong improvement in EFERT's fundamentals. Engro Fertilizer (EFERT) posted profit of PKR5.5bn in CY13, against loss of PKR2.9bn in CY12, driven by diversion of gas supply from old plant to new plant (Enven) and increase in overall gas supply. Allocation of 60mmscfd gas supply from Guddu power plant from end of Jul-13 boosted production by 40% and lifted 2HCY13 earnings. Strong fertilizer earnings lifted s CY13 EPS by 5.1x YoY to PKR16.0, which would be followed by two years of +45% growth. still trades at an attractive CY14 PER of 7.6x while its key growth contributing investments, EFERT and EFOODS, trade at 9.9x and 39.6x respectively. Relative performance of and EFERT during CY14TD Comparison of PER of group companies 250 EFERT 45.0 CY14 CY EPCL EFERT EFOODS Source: KSE, Elixir Research 4 Elixir Securities February 19, 2014

5 Valuation Dec-14 Price Target of PKR250/share Using sum of the parts (SOTP) valuation method, we arrive at Dec-14 PT of PKR250/share for, which offers an upside of 42% from current levels. We have remained conservative and assumed a 25% conglomerate discount on equity value of all businesses. If we assume no discount, our PT would rise to PKR333/share. While CY14 PER of 7.6x is close to Elixir Universe PER, CY15 PER of 4.8x is much more attractive as compared to Elixir Universe CY15 PER of 6.7x. Our Dec-14 PT implies exit forward PER of 6.8x CY15 earnings which is still cheaper than our index target PER of 8.5x. is currently trading at 32% discount to market value of its listed investments (EFOODS, EFERT and EPCL) on a stake adjusted basis. BUY! Engro Corporation Limited PKRmn Dec-14 Equity Value Held (%) Engro's share After 25% discount Contribution to Dec-14 PT Engro Fertilizer 96,231 88% 84,683 63, Engro Foods 57,114 87% 49,690 37, Engro Polymer & Chemicals 15,912 56% 8,943 6, Engro Vopak Terminal 11,274 50% 5,505 4,129 8 Engro Eximp 8, % 8,753 6, Engro Qadirpur PowerGen 12, % 12,496 9, Total Value 201, , , Valuation breakup of PKR/share, percentage Stake adj. market value of listed Engro Group companies Engro Fertilizer EFOODS EPCL EXIMP Engro Energy Vopak 18, 8% 8, 3% 13, 5% 13, 5% 124, 50% (PKRbn) , 29% EFOODS EFERT EPCL 6 Source: KSE, Elixir Research 5 Elixir Securities February 19, 2014

6 Engro Fertilizer Limited contributes PKR124 (50%) to PT based on DCF Using Discounted Cash Flow (DCF) valuation technique, and incorporating portfolio discount of 25%, we value s shareholding in Engro Fertilizer Limited at PKR63bn, translating in to PKR124 per share of. We have assumed weighted average cost of capital (WACC) of 14.1%, which is based on a cost of equity of 17.0% and after-tax cost of debt of 9.3%. We have assumed terminal growth rate of 3%. Engro Fertilizer PKRmn CY14E CY16E CY17E CY18E Assumptions Risk free rate 10.0% Risk Premium 7.0% Cost of equity 17.0% After-tax cost of debt 9.3% WACC 14.1% Terminal Growth 3.0% FCFF 9,262 18,304 21,046 21,944 22,876 Discounting factor Discounted FCFF 9,262 16,035 16,153 14,755 13,475 PV of cash flows 69,680 PV of terminal value 73,345 Enterprise Value 143,025 Net debt 46,794 Dec-14 Equity Value 96,231 Engro's share 88% Discount 25% Contribution to PT 63,512 Contribution to PT (PKR/share) Engro Foods Limited contributes PKR73 (29%) to PT based on DCF Using discounted cash flows valuation methodology, we arrive at Dec-14 target equity value of PKR57bn for EFOODS. After using 25% portfolio discount, value of EFOODS shall be PKR73/share of. We have assumed used a cost of equity of 17.0% and a terminal growth rate of 10%. Valuation CY14 CY15 CY16 CY17 CY18. CY24 Assumption Risk free rate 10.0% Risk Premium 7.0% Beta (x) 1.0 Req. return on Equity 17.0% Terminal Growth 10.0% FCFE ,294 2,383 4, ,418 Discount Factor Discounted FCFE ,488 2,414. 2,375 PV of cash flows 19,788 PV of terminal value 37,326 Equity Value 57,114 Engro's share 87% Discount 25% Contribution to PT 37,267 Contribution to PT (PKR/share) Elixir Securities February 19, 2014

7 Engro Polymer & Chemicals contributes PKR13 (5%) to PT based on DCF Using DCF valuation methodology, and assuming a conglomerate discount of 25%, we arrive at Dec-14 target equity value of PKR7bn for Engro Polymer & Chemicals Limited (EPCL). EPCL contributes PKR13/share to our s PT. Engro Polymer and Chemicals PKRmn CY14E CY16E CY17E CY18E Assumptions Risk free rate 10.0% Risk Premium 7.0% Cost of equity 17.0% After-tax cost of debt 7.9% WACC 14.9% Terminal Growth 1.5% FCFF 1,616 2,384 3,433 3,521 3,571 n Discounted FCFF 1,616 2,075 2,602 2,324 2,052 PV of cash flows 10,669 PV of terminal value 15,587 Enterprise Value 26,255 Net debt 10,624 Jun-14 Equity Value 15,631 Engro's share 56% Discount 25% Contribution to PT 6,589 Contribution to PT (PKR/share) 12.9 Other investments contribute PKR39 (16%) to PT based on DDM We have used dividend discount model (DDM) technique for valuation of rest of the investments of. Other investments include two wholly owned subsidiaries, Engro Power Gen and Engro Eximp, and one joint venture, Engro Vopak. We have used cost of equity of 17.0%, and a conglomerate discount of 25%, to estimate Dec-14 total intrinsic value of PKR20.1bn for Engro Power Gen, Engro Eximp, and Engro Vopak combined, translating in to a contribution of PKR39/share (16%) to our Dec-14 PT of. 7 Elixir Securities February 19, 2014

8 CY10A CY11A CY12A CY13E CY14E CY16E CY17E CY18E CY10A CY11A CY12A CY13A CY14E CY16E CY17E CY18E Company Update Engro Fertilizers Limited Concessionary gas supply to boost margins Government approved provision of gas to Engro Fertilizers (EFERT) at concessionary rate of USD0.7/mmbtu for 10 years after recommendation from Law Ministry in Jan-14. The government has also approved extension in concessionary time frame for the days of production loss faced by EFERT due to unavailability of gas on SNGPL network. This would likely lead to margin expansion in CY14. The company s earnings would grow by 26% YoY in CY14 despite 9% reduction in volumes. Volumes would decline as temporary 60mmscfd gas supply would likely end in Mar-14, after which only Enven will be operational, until gas supply from dedicated fields comes online in CY15. Robust earnings growth in CY15 EFERT held an IPO in Dec-13 to fund capex for construction of pipeline for gas supply under long term gas supply agreement. Company would likely initiate construction of this pipeline after ECC ratifies the gas supply agreement. We believe this agreement would be ratified soon and expect pipeline to be completed by the end of CY14. Gas supply from Kunnar Pasakhi Deep would likely commence from Jan-15 and Engro Fertilizers would then be able to operate both its plants. CY15 earnings of Engro Fertilizers would likely grow by a whopping 87% YoY and contribute PKR22.3/sh to s earnings as both urea plants will be operational for the entire year and overall utilization would likely increase to 91%. EBITDA to rise with urea production CY15 fertilizer earnings shall contribute PKR22/sh (PKRbn) 40 EBITDA Urea Production (RHS) (mn tons) 2.50 (PKR) 40 EPS Contribution Source: Elixir research Source: Elixir research 8 Elixir Securities February 19, 2014

9 CY10A CY11A CY12A CY13A CY14E CY16E CY17E CY18E Company Update Engro Foods Limited owns 666mn shares (87%) of EFOODS. Engro Foods Ltd (EFOODS) is the third largest consumer company in Pakistan which has recently shifted its focus from growth to consolidation. As such we expect sales growth to average 11% during CY14-16, while earnings growth will remain strong in CY14/15 due to trough earnings in CY13, and subsequently fall to 25% during CY Earnings growth would outperform sales growth as focus on consolidation of existing portfolio would likely deliver margin expansion. While EFOODS is trading at CY14 PER of 39.6x, at 7.6x CY14 earnings offer a much better exposure to the high growth food business. Earnings to rebound from trough levels EFOODS reported profit of PKR211mn (recurring profit after excluding one offs was PKR1.1bn) in CY13, down 92% YoY. Other expenses primarily dragged annual earnings as the company booked a provisioning worth of PKR200mn on account of input tax adjustment while losses of subsidiary Engro Foods Canada Ltd were also booked. In absence of these non-recurring charges, CY14 profits would rise by exorbitant 8.0x YoY. Even if we ignore the non-recurring expenses, recurring earnings would rise by 77% YoY in CY14. EBITDA is estimated to rise by 54% YoY during CY14 which would be driven by growth in volumes coupled with recovery in margins. Recurring earnings growth will average 49% in CY14/15, and subsequently fall to 25% during CY Earnings growth would outperform sales growth as focus on consolidation of existing portfolio would likely deliver margin expansion. CY10-18 volume growth CY10-18 EBITDA margin % 30% 25% 20% 27% 23% 23% Volume growth % 16.0% 14.0% 12.0% 11.9% 15.1% EBITDA margin 11.8% 12.2% 13.1% 15% 10% 11% 10.0% 8.0% 9.5% 8.8% 5% 4% 5% 4% 4% 6.0% 0% -7% 4.0% 2.0% -5% -10% 0.0% CY10A CY11A CY12A CY13A CY14E CY16E Source: Company Accounts, Elixir Research Source: Company Accounts, Elixir Research offers a much better exposure to food business While EFOODS is trading at CY14 PER of 39.6x, at 7.6x CY14 earnings offer a much cheaper exposure to the high growth food business. 9 Elixir Securities February 19, 2014

10 CY14E CY16E CY17E CY18E CY19E CY20E CY21E CY22E CY23E CY24E CY25E CY26E CY27E CY28E CY29E CY30E CY31E CY32E CY33E CY34E Company Update Engro Qadirpur PowerGen Engro Powergen Limited is a wholly owned subsidiary of Engro Corporation Limited. It runs a 217MW combine cycle power plant that consume low BTU permeate gas from Qadirpur gas field in Ghotki district, Sindh. It commenced operations on 27th March, The cost of the project was approximately USD186mn, financed with a debt: equity ratio of 72:28. is planning to increase free float of Engro Qadirpur PowerGen and targeting listing by mid Strong return profile hedged against key risks Under the Power Purchase agreement (valid for a period of 25 years), Engro PowerGen sells electricity to National Transmission and Dispatch Company (NTDC). The tariff covers the interest payment, loan repayments, working capital costs, insurance and O&M charges and guarantees 15% USD ROE over the life of the project. Dividend income to from power business Circular debt impact to be minimal because of low cost (PKR/share) 6.00 (PKR/kwh) Cost of generation NCPL NPL HUBC KAPCO KOHE EEL Source: Elixir research Source: Elixir research Profitability hiccup in 2013 to be a temporary phenomenon Engro Power Gen posted profit of PKR1.46bn in CY13, down 28% YoY. Weak CY13 results emanated on account of a fault in gas turbine generator during 4Q which hurt earnings. Despite this one timer, the company contributed PKR2.9/share or 18% to s CY13 consolidated earnings. Post normalization of fertilizer business (CY15), PowerGen shall contribute 13% to s bottom-line. Coal mining could be an upside Sindh Engro Coal Mining Company (Engro Powergen s Joint Venture with the Sindh Government) owns working interest in Thar Coal Block II which it intends to develop for coal mining. The project was recently inaugurated and offers another upside to as we have not assumed any value addition from Sindh Engro Coal Mining Company. The government of Pakistan has agreed to give debt servicing guarantee of USD mn for Sindh Engro Coal Mining Company and has also directed GENCO Jamshoro to sign coal off-take agreement. The management is also planning an investment in 24MW captive power unit in Nigeria, on which they are targeting an IRR of 18%. 10 Elixir Securities February 19, 2014

11 CY10A CY11A CY12A CY13A CY14E CY16E CY10A CY11A CY12A CY13E CY14E CY16E Company Update Engro Eximp Engro Eximp is a 100% owned subsidiary of Engro Corporation Pakistan Limited which deals in trading of fertilizer (with prime focus on phosphates) and owns a rice processing and trading business. Engro Eximp imports phosphate based fertilizers and sells it to its sister concern Engro Fertilizer Limited. Engro fertilizer resells these fertilizers to dealers using its already established distribution network. Engro Eximp also procures unprocessed rice and paddy and sells it after processing and repackaging. Phosphate business shall post strong profits Phosphate business has been posting strong profits during CY09-13 with an average net margin of 7%. EXIMP imported and sold 401k tons of phosphate fertilizers during CY13, which is estimated to have resulted in profit of PKR1.1bn. While net margin recovered to 4% in CY13, after dipping to 2% in CY12. We expect net margin on phosphates to average at 3% during CY Rice remains a long term play Rice business is yet to achieve its breakeven and estimated to have posted loss of PKR1bn. Utilization remained relatively low at 49% as energy costs remained high which is roughly 30-45% of total variable cost. We expect volumes to increase gradually in CY14-15 as 4MW steam turbine has commissioned in Nov-13. We expect the business to post a loss of PKR592mn in CY14 and breakeven in CY15. EXIMP earnings shall still remain strong Despite losses in Rice, Engro Eximp posted a marginal profit of PKR59mn in CY13. EXIMP would likely sustain strong profitability in CY14 and contribute PKR0.71/share to s earnings. Volumes and profitability of phosphate business Rice business to achieve breakeven in 2015 (000 tons) Phosphate Volumes EPS contribution (RHS) (PKR) (%) Rice Capacity Utilization EPS contribution (RHS) (PKR) % % 80% % % 20% % Source: Elixir research Source: Elixir research 11 Elixir Securities February 19, 2014

12 CY09A CY10A CY11A CY12A CY13E CY14E CY09A CY10A CY11A* CY12A CY13E CY14E Company Update Engro Vopak Terminal Engro Vopak Terminal Limited (EVTL) is a joint venture of Engro Corporation with Royal Vopak, a Dutch company. The company was setup with an investment of USD60mn in Royal Vopak is one of the largest terminal storage companies in the world dealing in chemical and oil industry. Chemical handling so far Vopak currently deals in storage and handling of chemicals. It owns a liquid chemical and LPG terminal at Port Qasim near Karachi. The company s key customers are ICI Pakistan, Lotte Pakistan, Fauji Fertilizer Bin Qasim and sister concern Engro Polymer. The company handles paraxylene, Acetic Acid, Phos acid, MEG, Ethylene, VCM and PTA. Vopak has long term contracts with all its customers. but energy experience of JV partner shall come into play Engro Vopak has recently been working on LNG import, for which it has established a subsidiary named Elengy Terminal Pakistan Limited. The subsidiary shall work with the government for the import of LNG and establishment of an LNG terminal. The company has submitted proposal to the government for setting up the terminal. The proposal suggests a 15 years contract for the import of LNG. Materialization of this project would likely be earnings accretive for the company. Earnings outlook Due to reduction in pricing on contract of Lotte Chemical Pakistan, net sales of Vopak dropped by 15% YoY during CY13 and accordingly profit declined 18% YoY to PKR1.2bn. Earnings would likely rise by a mere 5% to PKR1.3bn in CY14 and grow at a meager 4% during CY Volumes to remain strong due to long term contracts Payout ratio to remain high going forward (mn tons) Vopak Volumes Net margin (RHS) 1.11 (PKR/ton) 1,600 (PKRbn) Profit Dividends Payout ratio 1.6 (%) 120% ,400 1,200 1, % 80% 60% 40% 20% 0% *Profit is shown after excluding the impact of tax reversal Source: Elixir research Source: Elixir research 12 Elixir Securities February 19, 2014

13 CY10A CY11A CY12A CY13E CY14E Company Update Engro Polymer & Chemicals Limited Engro Polymer Chemicals Limited is the only fully integrated Chlor-Vinyl chemical complex in Pakistan producing Chlor-Vinyl allied products and PVC (Polyvinyl Chloride). With EPCL s VCM plant achieving stable operations in CY13 and all the PVC being produced from in house VCM production, EPCL is now ready to focus on market development and further debottlenecking of PVC capacity. holds 56% stake in EPCL. Strong cash flow generation EPCL s operating cash flows are estimated to grow at an average rate of 22% in the next three years mainly driven by strong earnings which are projected to grow at a CAGR of 26% during CY14-17E. On the other hand EPCL's depreciation expense would average PKR1.3bn or PKR2.0/sh during CY14-17, 58% of the bottom-line and roughly 100% higher than the estimated annual maintenance capex of PKR~600mn (PKR0.9/share). In fact, depreciation would be more than sufficient to cover capex pertaining to capacity debottlenecking as well as plant maintenance. This would allow EPCL to earn back the debt funded portion of the project quicker. Management targets complete payoff of long term debt by CY17, while we have remained conservative and assumed PKR1.0bn in capex over and above company guidance, our estimates still allow long-term debt pay off by mid CY18. Earnings growth vs. EBITDA Margin Increasing margins trend PKR/sh EPS EBITDA Margin % 20% USD/ton PVC Margins Primary Margin % % (1.2) (1.1) % 16% 14% 12% 10% 8% % 45% 40% - (0.50) 6% 4% % (1.00) (1.50) 2% 0% 250 CY10A CY11A CY12A CY13E CY14E 30% Source: Company Accounts, Elixir Research Source: Company Accounts, Elixir Research Capacity debottlenecking projects in pipeline EPCL has already completed its first phase of debottlenecking and added 6k tons of PVC capacity by implementing a hot water charging project. The second phase involves installation of chillers which is going to augment PVC capacity by another 15k tons and is expected to be completed by 3QCY14, taking total PVC capacity to 171k tons/annum. Robust earnings growth We expect EPCL's earnings to rise by 99% to PKR1.4bn during CY14 driven by volume growth, margin expansion and decline in finance cost due to debt repayments. Volumetric growth visà-vis capacity debottlenecking and debt payoff shall deliver EPS CAGR of 26% during CY15-18E. 13 Elixir Securities February 19, 2014

14 Financials Income Statement PKRmn CY11A CY12A CY13A CY14E CY16E Net Sales 114, , , , , ,190 Operating costs 88, , , , , ,579 EBITDA 29,414 26,603 36,007 38,312 49,887 54,036 EBIT 25,703 19,860 30,108 30,352 41,407 44,612 Finance Cost 12,315 16,145 14,255 9,839 9,110 7,326 Net Profit - Recurring 8,060 1,333 8,183 11,840 18,678 21,552 EPS Recurring (PKR) Net Profit Reported 8,060 1,333 8,183 11,840 18,678 21,552 EPS Reported (PKR) Balance Sheet PKRmn CY11A CY12A CY13A CY14E CY16E Paid up Capital 3,933 5,113 5,113 5,113 5,113 5,113 Reserves + Unapp profit 37,957 38,135 46,825 59,223 76,651 92,804 Shareholders Funds 41,890 43,247 51,937 64,335 81,764 97,917 Long Term Loans 87,431 79,276 78,755 63,496 48,213 35,457 Current Liabilities 53,684 67,063 40,466 45,601 53,851 54,926 Capital & Liabilities 183, , , , , ,299 Net Fixed Assets 138, , , , , ,671 Current Assets 44,945 52,615 38,545 39,340 54,502 62,629 Total Assets 183, , , , , ,299 Cash Flow Statement PKRmn CY11A CY12A CY13A CY14E CY16E Recurring Net Profit 7,811 1,797 8,690 13,550 21,473 24,836 Depreciation 5,960 8,264 5,900 7,960 8,480 9,424 Working Capital Changes 4,297 (3,793) (513) (1,131) (3,347) (1,187) Operating Cash Flows 18,068 6,268 14,077 20,379 26,606 33,073 Capex (11,757) (5,682) (2,866) (9,399) (3,670) (5,724) Add: Interest (after tax) 8,004 10,494 9,266 6,396 5,922 4,762 Others (1,179) (1,495) 1,325 (40) (43) (45) FCFF 13,136 9,585 21,802 17,335 28,815 32,066 Less: Interest (after tax) (8,004) (10,494) (9,266) (6,396) (5,922) (4,762) Net debt (891) (740) (14,164) (9,859) (12,652) (12,826) FCFE 4,240 (1,649) (1,629) 1,080 10,241 14,478 Dividends Paid (37) (440) (0) (1,152) (4,045) (8,683) Net Cash Flow 4,204 (2,089) (1,629) (71) 6,196 5,795 Beginning cash 8,546 12,750 10,661 9,033 8,961 15,158 Ending cash 12,750 10,661 9,033 8,961 15,158 20,952 Source: Company Accounts, Elixir Research 14 Elixir Securities February 19, 2014

15 Financial Ratios CY11A CY12A CY13A CY14E CY16E EPS - rec DPS BVPS PER EV/EBITDA P/BV Div Yield 3% 0% 0% 1% 4% 9% ROCE 10% 8% 11% 10% 12% 11% ROA 5% 1% 5% 7% 10% 12% ROE 21% 3% 17% 20% 26% 24% Gearing Turnover Growth 43% 9% 24% 14% 20% 7% EBITDA Growth 111% -10% 35% 6% 30% 8% Net Profit Growth 19% -83% 514% 45% 58% 15% 15 Elixir Securities February 19, 2014

16 Chief Executive Officer Junaid Iqbal (92-21) Pakistan Research Team Institutional Equities Retail Equities Azfer Naseem, CFA Head of Research (92-21) Sateesh Balani (92-21) Ujala Adnan (92-21) Faisal Bilwani Head of Equities - FII (92-21) fbilwani@elixirsec.com M. Sibtain Mustafa Head of Equities - LII (92-21) smustafa@elixirsec.com Jawwad Aboobakar (92-21) jawwad@elixirsec.com Muhammad Ali Taufiq Head of Equity Strategy Retail (92-21) alitaufiq@elixirsec.com Sikandar Rahim (92-21) srahim@elixirsec.com Kamran Kaludi (92-21) kkaludi@elixirsec.com Mubashir Anis Silat (92-21) manis@elixirsec.com Syed Nasir Rizvi (92-21) snarizvi@elixirsec.com Ibad-ur-Rehman (92-21) irehman@elixirsec.com Syed Tahseen (92-21) tjaved@elixirsec.com Muhammad Raza Rawjani (92-21) rrawjani@elixirsec.com HNW & Family Offices Harris Ahmed Batla (92-21) habatla@elixirsec.com Lahore Office Tahir Maqbool (92-42) tmaqbool@elixirsec.com Adil Abid (92-21) aabid@elixirsec.com Khurram Malik (92-21) kmalik@elixirsec.com Islamabad Office Asim Ghafoor Qureshi (92-51) aghafoor@elixirsec.com Faisalabad Office Syed Baqar Hassan (92-41) sbhassan@elixirsec.com 16 Elixir Securities February 19, 2014

17 Analyst Certification The Elixir Research Team certifies that (1) the views expressed in this report accurately reflect their personal views about all of the subject companies/securities and (2) no part of their compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report. Disclaimer The report has been prepared by Elixir Securities Pakistan (Pvt.) Ltd and is for information purpose only. 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, expressed or implied is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. 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. Research Dissemination Policy Elixir Securities Pakistan (Pvt.) Ltd. endeavors to make all reasonable efforts to disseminate research to all eligible clients in a timely manner through either physical or electronic distribution such as mail, fax and/or . Nevertheless, not all clients may receive the material at the same time. Company Specific Disclosures Elixir Securities Pakistan (Pvt.) Ltd. may, to the extent permissible by applicable law or regulation, use the above material, conclusions, research or analysis in which they are based before the material is disseminated to their customers. Elixir Securities Pakistan (Pvt.) Ltd., their respective directors, officers, representatives, employees and/or 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. Elixir Securities Pakistan (Pvt.) Ltd. 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. Elixir Securities Pakistan (Pvt.) Ltd. may have recently underwritten the securities of an issuer mentioned herein. Other Important Disclosures Foreign currency denominated securities is subject to exchange rate fluctuations which could have an adverse effect on their value or price, or the income derived from them. In addition, investors in securities such as ADRs, the values of which are influenced by foreign currencies effectively assume currency risk. Copyright 2014, Elixir Securities Pakistan (Pvt.) Ltd. All rights reserved. This report or any portion hereof may not be reproduced, distributed, published or sent to a third party without prior consent of Elixir Securities Pakistan (Pvt.) Ltd. 17 Elixir Securities February 19, 2014