HJJGJG
Engro Foods
PAKISTAN
Strong growth prospects warrant an
Outperform rating
Initiating with an Outperform rating and PKR76.9 target
We initiate coverage on Engro Foods Limited (Efoods) with an Outperform rating and DCF-based TP of PKR76.9. The company has a diverse product portfolio catering to different price segments in a growing industry, its brand equity is increasing, its margins are increasing and its marketing expenses as a percentage of sales are falling.
EFOODS PA
Price (at CLOSE#, 21 May 2012)
12-month target
Upside/Downside
Valuation
Outperform
Rs65.63
Rs
%
Rs
76.90
17.2
76.90
- DCF
GICS sector
Food, Beverage
& Tobacco
Market cap
Rsm
49,091
30-day avg turnover
US$m
4.3
Market cap
US$m
538
Number shares on issue m 751.8
Investment fundamentals
Year end 31 Dec
Revenue
EBIT
EBIT growth
Reported profit
EPS rep
EPS rep growth
PER rep
Total DPS
Total div yield
EV/EBITDA
Net debt/equity
P/BV
2011A 2012E 2013E 2014E m 29,859 42,259 55,713 71,235 m 2,412 4,113 6,490 8,990
% 159.3
70.5
57.8
38.5
m
891 2,004 3,393 5,092
Rs
1.19
2.66
4.51
6.77
% 372.8 124.3
69.3
50.1 x 55.2
24.6
14.5
9.7
Rs
0.00
0.00
0.00
0.00
%
0.0
0.0
0.0
0.0
x
16.3
10.2
6.6
4.9
%
76.2
96.6
64.4
33.7
x
6.8
5.3
3.9
2.8
Source: FactSet, Macquarie Research, May 2012
(all figures in PKR unless noted)
Analyst(s)
Gary Pinge
+852 3922 3557
gary.pinge@macquarie.com
Foundation Securities
Ali Ahmad Tiwana
92 21 5612290-94
ali.tiwana@fs.com.pk
24 May 2012
Macquarie Capital Securities Limited
Pakistan was the fourth-largest milk producer in the world as of 2010, with annual production of around 38bn litres, according to the United Nations Food and
Agriculture Organization. The Ultra High Temperature (UHT) market had a 12%
CAGR over 2005–11, but the processed milk industry still only comprises 8% of the tradable milk market in Pakistan. Increasing modernization,
PAKISTAN
Strong growth prospects warrant an
Outperform rating
Initiating with an Outperform rating and PKR76.9 target
We initiate coverage on Engro Foods Limited (Efoods) with an Outperform rating and DCF-based TP of PKR76.9. The company has a diverse product portfolio catering to different price segments in a growing industry, its brand equity is increasing, its margins are increasing and its marketing expenses as a percentage of sales are falling.
EFOODS PA
Price (at CLOSE#, 21 May 2012)
12-month target
Upside/Downside
Valuation
Outperform
Rs65.63
Rs
%
Rs
76.90
17.2
76.90
- DCF
GICS sector
Food, Beverage
& Tobacco
Market cap
Rsm
49,091
30-day avg turnover
US$m
4.3
Market cap
US$m
538
Number shares on issue m 751.8
Investment fundamentals
Year end 31 Dec
Revenue
EBIT
EBIT growth
Reported profit
EPS rep
EPS rep growth
PER rep
Total DPS
Total div yield
EV/EBITDA
Net debt/equity
P/BV
2011A 2012E 2013E 2014E m 29,859 42,259 55,713 71,235 m 2,412 4,113 6,490 8,990
% 159.3
70.5
57.8
38.5
m
891 2,004 3,393 5,092
Rs
1.19
2.66
4.51
6.77
% 372.8 124.3
69.3
50.1 x 55.2
24.6
14.5
9.7
Rs
0.00
0.00
0.00
0.00
%
0.0
0.0
0.0
0.0
x
16.3
10.2
6.6
4.9
%
76.2
96.6
64.4
33.7
x
6.8
5.3
3.9
2.8
Source: FactSet, Macquarie Research, May 2012
(all figures in PKR unless noted)
Analyst(s)
Gary Pinge
+852 3922 3557
gary.pinge@macquarie.com
Foundation Securities
Ali Ahmad Tiwana
92 21 5612290-94
ali.tiwana@fs.com.pk
24 May 2012
Macquarie Capital Securities Limited
Pakistan was the fourth-largest milk producer in the world as of 2010, with annual production of around 38bn litres, according to the United Nations Food and
Agriculture Organization. The Ultra High Temperature (UHT) market had a 12%
CAGR over 2005–11, but the processed milk industry still only comprises 8% of the tradable milk market in Pakistan. Increasing modernization,