FFBL & ENGRO

Fertilizer Sector – Fly in the Face of Facts
Analyst: Salman Bashir Memon July 2006

Fauji Fertilizer Bin Qasim: Implanting the Seed of Expansion
Witnessing the agriculture stability, robust demand potential of fertilizer products plus its consumption, and DAP driven fertilizer market, capacity expansion, we recommend to buy Fauji Fertilizer Bin Qasim with a target price objective of PKR 43 on our fundamentally driven DCF based fair value of Rs 41.23 per share. Over the next three years we expect the bottom line of the company to increase by 12% FFBL is currently trading at PKR 29 lower than its calculated DCF fair value, thus offering PKR 14 upside potential. We also believe that the company is going to announce a dividend Rs 2.1 per share for FY06 and hopeful about future earnings

ENGRO Chemical Pakistan: Fly in the Face of Facts
Assuming the demand for overall fertilizer products, particularly Nitrogen & Phosphates, has increasing @ 10% CAGR the 4% Agriculture Sector CAGR, 12% Fertilizer Sector CAGR, 10% increase in Fertilizer Demand Potential, & 24% rise in ECPL sales revenue & strengthen product base in locally manufactured and purchased fertilizer products we recommend to Sell on strength ECPL with a target price of Rs185. Over the next year we expect the bottom line of the company to increase by 11%. ECPL is currently trading at Rs174 lower than its calculated DCF fair value of Rs184, thus offering Rs10 upside potential. We also believe that the company is going to announce a dividend of Rs15 of its prospective earnings which leads to an attractive yield of 7% making ECPL even more captivating for medium & long term investment.

Agriculture: Engine For Economy
Agriculture performance improved on account of bumper cotton and wheat crops of about 15 million bales and 21 million tones respectively. A 7.8% rise in cultivated area, use of improved quality pesticide and favorable weather condition are responsible for the rise in cotton production. The rise in support price, adequate and timely supply of inputs including fertilizer, availability of certified the widespread and timely winter rains helped in achieving higher than targeted wheat production. Sugarcane production was down by 15.2 percent due to water shortage during Kharif season. Rice, another water concentrated crop, grew by 2.9 percent over last year. However, at best, a 10% to 12% expansion in water resources can be expected, after 8 to 10 years. We are expecting the 4% per annum sartorial growth for coming three years.

Pakistan Fertilizers Sector – Stimulator For Productivity
Urea industry witnessed healthy growth of around 10% as the market grew from 4.7 million tons in 2004 to 5.2 million tons in 2005. Production improved to 4.7 million tons in 2005, registering a growth of 7%. Urea shortage in the country was met by imports of approximately 5.3 million tons by the Government of Pakistan. Overall industry for phosphates grew by 11% to 1.5 million tons. The country continues to face urea scarcity which is expected to increase with the passage of time. Domestic urea production capacity requires enrichment & fortification to accommodate for growing domestic demand and prevent the need for import of urea at excessive cost to the national exchequer.

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FFBL & ENGRO
Fair Value: Rs 41.23 Buy: Rs 30

FFBL Implanting the Seed of Expansion
Witnessing the agriculture stability, robust demand potential of fertilizer products plus its consumption, and DAP driven fertilizer market, capacity expansion, we recommend to buy Fauji Fertilizer Bin Qasim with a target price objective of PKR 43 on our fundamentally driven DCF based fair value of Rs 41.23 per share. Over the next three years we expect the bottom line of the company to increase by 12% FFBL is currently trading at PKR 29 lower than its calculated DCF fair value, thus offering PKR 14 upside potential. We also believe that the company is going to announce a dividend Rs 2.1 per share for FY06 and hopeful about future earnings.

Fauji Fertilizer Bin Qasim Overview
Fauji Fertilizer Bin Qasim Limited is a US$ 461 Million Project. One of the largest in private sector in Pakistan, producing both DAP and Granular Urea for the first time in the country. The largest and well-known industrial group of Faujis and Jordan Phosphate Mines Company sponsors the project. The factory is strategically located at Port Qasim, 35 kms south of Karachi City, on the banks of the Port Qasim. The plant is well connected, both by rail and road. The National Highway (NH) from Karachi to other cities of the country separates FFBL from the Bin Qasim.

Investment Justification
• Proceeding the growth of overall agricultural sector and demand of DAP fertilizer within agriculture community; FFBL seems attractive for medium and short term investment at current level and we believe that FFBL management never makes any mistake for motion of progress. Rehabilitation of FFBL’s DAP plant and cheaper raw material plus possible dividend income from Pak Maroc Phosphore explores the confidence of FFBL’s management and stakeholders expectations. BMRE project of ammonia plant to increase its production capacity and efficiency further strengthen its position in fertilizer industry, capturing market share thereby increasing wealth of shareholders. FFBL management marching towards sustainable growth and we are confident to say that effect of expansion on profitability margins will be added from CY08 and EPS will increase drastically as DAP production capacity increase up to 50%. We are positive about the future performance of FFBL. The net profit after tax is expected to grow to Rs 2,580 million for FY06 and the expected earning per share for the same period is Rs2.8.

Financial Performance
Face Value: Book Value (2006F): EPS (2006F): Outstanding Shares (m):

10 8.96
2.8 934.1 •

Price Performance
Market Capitalization (m): FFBL PE Sector PE Short Term Potential Long Term Potential Average Return Potential

37.457
10.94X

9.4X 0.6%
45.9% 23.2%

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& mismanagement of irrigation systems.00% Risk Factors: There are number of risk factor involved in the agriculture production growth such as: limited availability of quality seed. Fruit. no use of modern technology in agricultural extension. In this purpose.9 percent over last year.292 mn Share in GDP: 23. depletion of water resources. as compared to Rs 100 billion last year Page 3 of 24 . a 10% to 12% expansion in water resources can be expected. A 7.17 mn hectors Irrigation Sources: • Canals • Ground water Water Supply: • Indus River 60% • Rainfall 15% • Ground Water 25% Agricultural Products Cotton.00% 2.00% -1. We are expecting the 4% per annum sartorial growth for coming three years. Since last couple of years government has been emphasizing on providing agri-loans at affordable interest rates to farmers on regular basis.4% in large-scale manufacturing.8% rise in cultivated area. Rice. HT TH Agri-Credit for Farmers & Growers Agriculture credit is one of the key factors to boost the agriculture sector. another water concentrated crop.00% 4.6% and exceeding the 8% mark for the fifth time in the Country’s history. Vegetables. Sugarcane production was down by 15.00% 6.00% 5. Indicators: Economy Value: PRs1. Country’s economic expansion continued for the third consecutive year registering an annual growth rate of 8.00% 1. grew by 2. Wheat. availability of certified the widespread and timely winter rains helped in achieving higher than targeted wheat production. disbursement of agricultural credit.2 percent due to water shortage during Kharif season. Rs 130 billion agri-loan target for FY06-07 has been approved. after 8 to 10 years. Rice.09% Cultivated Area: 22.4% in 2004-05 as against 6.00% 7. The rise in support price.FFBL & ENGRO Agriculture Sector – Intensification Get Nearer Agriculture accounts for nearly 23% of Pakistan’s GDP and contributes significantly to the country’s economy by employing about 68% of the rural population.5% in agriculture and a strong 7. erosion and soil fertility depletion).4% last year. The growth is supported by enhanced performance of 15. at best.00% 0. impressive recovery of 7. Future & Forecast Agriculture performance improved on account of bumper cotton and wheat crops of about 15 million bales and 21 million tones respectively. adequate and timely supply of inputs including fertilizer.00% 3. Accessibility of easy and low cost agriculture loans plays an important role in increasing farm output and productivity. soil degradation (soil salinity. Food grain.00% 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 -2. 034. widely surpassing the targeted rate of 6. use of improved quality pesticide and favorable weather condition are responsible for the rise in cotton production. Agriculture Sector Growth 8.00% -3. Sugarcane.9% growth in the services sector. However.

Five factories are located in the Punjab and two each in Sindh and the Northwest Frontier Province.3 million tons by the Government of Pakistan. 6 are in private sector whereas 4 are under Federal Government control. Urea shortage in the country was met by imports of approximately 5. the import of fertilizer also increased considerably by 6%. USA.563 Technology • High Technology Imported from Italy. The main reason for this concentration on nitrogenous fertilizers is that its main raw material i. Natural gas and phosphate rock serve as the primary raw material for nitrogen-based and phosphate-based fertilizers.415 thousand tones phosphates fertilizers (1.753 Contribution to GDP • 0.1%. The country continues to face urea scarcity which is expected to increase with the passage of time. The FY06 commenced with a low inventory of 403 thousand tones which was 5% lower than that of FY05. Japan and Local Phosphates Fertilizers Market The industry phosphates fertilizers (DAP. The fertilizer off-take during month of June 2006 increasing slightly and will increases in the medium term. Local fertilizer production is concentrated in nitrogenous fertilizers. Out of nine factories. The off-take of fertilizer was therefore. Domestic urea production capacity requires enrichment & fortification to accommodate for growing domestic demand and prevent the need for import of urea at excessive cost to the national exchequer. Local DAP production of 452 thousand tones during the year was 3% higher as compared to production in FY05.2 million tons in 2005.7 million tons in 2004 to 5.e. natural gas is cheaply available in the country.FFBL & ENGRO Pakistan Fertilizer Market – Keep Abreast Of Sector Sketch There are nine fertilizer-producing plants in Pakistan.373 • Private Sector 4. The domestic production of fertilizer during the first two months (June-July.983mn Sector Market Cap: PRs108. Production improved to 4. Denmark. MAP and TSP) sales of 440 thousand tones during the year FY06 (Jan-July) were 7% higher than sales for same period last year. Due to the high level of imports during Page 4 of 24 . 154 thousand tones MAP and 109 thousand tones TSP) were imported. registering a growth of 7%. On the other hand. England. Contemporary Sight Urea industry witnessed healthy growth of around 10% as the market grew from 4.152 thousand tones DAP. This was in spite of an upward revision in domestic prices resulting from an increase in international prices and local freight cost. Urea Market The urea market has exhibited tendency towards increase throughout the year as a result of favorable economic conditions.7 million tons in 2005. hence total availability of fertilizer was increased by 10% in the current FY. The primary criterion for the location of fertilizer plants is access to natural gas. To meet the local requirements 1. higher by 6.384 • Total 5. 384mn Total Investment: PRs 87bn Installed Capacities (000 Tons) • Public Sector 1.40% Weight age in KSE-100 index • 6% Employment • More than 7. which comprises 85% of all fertilizers produced in the country. Overall industry for phosphates grew by 11% to 1. Spot Trends Number of Units • Public 4 • Private 6 • Total 10 Sector Capital: PRs 14.5 million tons. FY06-07) was up by 7%.

Fauji Fertilizer Bin Qasim Limited is lead the ways of premium quality DAP manufacturing in Pakistan and it has a 13% market share in fertilizer industry.904 (000’MT) which is followed by Engro. Fauji Fertilizer Bin Qasim. and DHCL.124 million tones per annum. FFBQ Market Share ENGRO The market is divided among five major players which include Fauji Fertilizers. nitro phosphate (NP) and ammonium sulfate (AS) Sector Break up DH NFC FFC Sector Breakup Fertilizer sector is comprised of a number of manufacturers which are engaged in the production. and National Fertilizer Company. Engro Chemical Pakistan Limited is the second leading producer of Urea fertilizer in Pakistan with production capacity of 850 (000’MT) of Urea and opt the 20% market share. Currently there are five major fertilizer producing plants in Pakistan. FFBQ. calcium ammonium nitrate (CAN). The total installed capacity is 5. NFC. Company has made significant progress in developing its own hybrid seeds of maize and sunflower crops and launched two new maize hybrids of imported origin of Bemisal.904 850 100 550 450 92 445 755 Production Capacity The local fertilizer companies get together almost 80% of Pakistan’s Fertilizer requirement. FFC is certainly the market sales and production leader having production capacity of 1. marketing and imports of fertilizer products. Page 5 of 24 . Engro accomplished significant progress not only in its base urea fertilizer business but also in diversification projects. It mainly comprises of 4. the year ended with a huge phosphates fertilizer inventory of 200 thousand tones. Engro Chemical. as compared to an inventory of 50 thousand tones at end December Manufacturers FFC ENGRO FFBQ NFC DHCL Urea Phosphates Production Capacity (000’ MT) 1.FFBL & ENGRO the last quarter. Being a subsidiary company of FFC overall market share stands 62%. Dawood Hercules.180 million tones for urea and remaining for single super phosphate (SSP).

higher support prices for wheat and cottonseeds and enhanced agriculture credit would be a trigger to high urea off takes. Compared with previous years fertilizer manufacturers on the back of enhancement of production capacity and rising urea prices for end users. against 238 thousand tones in the same month last year while DAP off-take in April remained at 65. around 1. as compared to a 6. Domestic Production ('000' N/tons) T otal Sector Import Country Off-take Page 6 of 24 .5%. and more credit availability to growers. up 56. which went down by 9.6% compared with same month of the last year. Fertilizer Off-take Urea off-take in June registered a decline of 15. 276 thousand tons.FFBL & ENGRO Another main involvement in the sector is from National Fertilizer Company which has capacity of 438 (000 MT) and 9% market share.2% as compared with same time frame of last season.7% YoY during JulyJanuary FY06. Fertilizer demand has been fundamentally strong on account of improved farm income. Total nutrient off take during June 2006 was about 197 thousand tones. Dawood Hercules is the Urea producer and its boilerplate capacity is 445 (000MT) and market share stands at 9%. Fertilizer Supply-Demand 4000 3000 2000 1000 0 FY0 102 FY0 2 03 FY0 3 04 FY0 4 05 FY0 506 P FY0 6 07 P Outlook The fertilizers industry is in front of capacity constraints.6 metric tons fertilizer was imported during July-January FY06.3% YoY rise in FY05. In order to fill the supply/demand gap.7% YoY. The total nutrient off-take rose by only 4.5 thousand tones witnessing an increase of 38.

Pakistan was importing almost one million tons of urea and 800. 457Million Free Float 27. FFBL Current Price PKR 29 52 weeks High-Low Rs43. FFBL contribution is 60% in total DAP market. After the initial discussions with the Jordan Phosphate Mines Company.300.FFBL & ENGRO Fauji Fertilizer Bin Qasim – An Inside Observation KATS Code The Past By the early nineties.56% (approx) Production Capacity Presently FFBL has capacity to manufacture 551 thousand tones of Urea and 445 thousand tones of DAP annually. After successful implementation of the project design capacity of ammonia plant will be increased and therefore increases current production capacity of DAP to 681 thousand tones and Urea capacity to 676 thousand tones per annum approximately by 1H07. The complex is now in normal operation and supplying high quality fertilizer urea (G) and DAP to the farmers of Pakistan. followed by Urea in April 1999.50 (1st Interim FY06) P P Dividend Yield 6% 50 45 40 35 30 25 20 15 10 5 0 7/29/2005 8/29/2005 9/29/2005 10/29/2005 11/29/2005 12/29/2005 1/29/2006 2/28/2006 3/29/2006 4/29/2006 Raw Material Get Cheaper For sake of non-stop cheap supply of Phosphoric Acid.90 – Rs25.5 Million Shares Shares Outstanding 934.00 (FY05) Rs: 0. At that time management of Fauji Fertilizer embarked on the FFC-Jordan Fertilizer Project in order to make Pakistan self-sufficient in Urea fertilizer and to drastically reduce the import of DAP fertilizer. At present total demand of DAP in a country stands at 80%. KT Phosphate Rock and 370. a long term agreement was signed between Morocco Phosphorus and.55 3 months ADV 18. The completion of revamping process will provide better capacity utilization and enhanced gas efficiencies to the company.11Million Shares Market Capitalization Rs37. Distribution Cash Dividend: Rs 2. a preliminary feasibility was undertaken in 1992 Two other new plants of DAP and urea were installed and the first production of DAP commenced in Nov 1998. KSE FFBL Price Page 7 of 24 . which is a basic raw material for producing DAP. KT Granular Sulfur. It will meet total requirement of phosphoric acid for the DAP production in FFBL plant at Bin Qasim. KT Phosphoric Acid per year by consuming 1. FFC and FFBL with 25% equity stake of 800 Million Moroccan Dirhams.000 tons of DAP per annum. The company is in process to increases its design capacity through BMRE. Fauji Group together with Fauji Foundation. This Project would have a production capacity of 375.

According to this policy feed stock prices would remain fixed till 2009. increasing urea prices are the main driver of the profitability of the urea manufacturing companies. Granular urea is the cheapest among all nitrogenous fertilizers based on per unit cost of nutrient. being the only manufacturer in Pakistan. which implies that FFBL can reap the maximum benefit of hike in urea prices and stable margin. FFBL is the main beneficiary of high prices as it has an advantage of fixed stock prices. being the only manufacturer of DAP in local market FFBL would be in a position to capture the market if growth comes in a particular commodity. less acidifying than many other nitrogenous fertilizers hence most suited for high pH soils and it is easier to spread in the field with minimum losses in the air. this enjoying the comparatively healthy margins. Granular urea is expanding its base owing to its unique characteristics over the standard prilled urea and brand recognition. U D rea esign C apacity U tilization (% ) Unique Product FFBL is the only producer of two distinctive products namely Granular Urea (Sona Urea) and DAP in Pakistan. DAP provides plant nutrients that are naturally lacking or that have been removed by harvesting or grazing.FFBL & ENGRO Moving ahead. DAP constitutes 21% of total fertilizer consumption in the market out of which 67% of DAP produced by FFBL. Diammonium Phosphate (DAP) as a fertilizer provides essential nutrients for crops along with an elevated nitrogen level and it is favored on more acidic soils. Added to the soil. Although currently it produces only 454 thousand tones due to the capacity constraint however with the coming capacity expansion FFBL is well placed to increase the market share and improve the top line growth. U DesignC rea apacity 640 620 600 580 560 540 520 500 FY02 FY03 FY04 FY05 FY06 FY07 FY08 Fixed Cost 108% 106% 104% 102% 100% 98% 96% 94% Fixed cost of feedstock gives FFBL an edge over its competitors as it enjoys 10-year gas subsidy provided by the government under the fertilizer policy 2001. Page 8 of 24 . DA DesignC P apacity 800 700 600 500 400 300 200 100 FY02 FY03 FY04 FY05 FY06 FY07 FY08 120% 100% 80% 60% 40% 20% 0% D D AP esign C apacity U tilization (% ) International DAP/Urea Prices On account of high demand of urea in country.

000 0 FY02 FY03 FY04 FY05 FY06 FY07 FY08 For the first quarter.000 20. On the basis of strong agriculture fundamentals and growing demand of fertilizer nutrients.5 FY FY FY FY FY FY FY -1 Growth in PAT Excluding GoP Compensation Growth in PAT Including GoP Compensation Retention ratio 26% 25% 24% 23% 22% 21% 20% FY02 FY03 FY04 FY05 FY06 FY07 FY08 Page 9 of 24 .000 10. net profits and earnings per share. Volatile behavior of fertilizer prices is the major reason behind FFBL profitability and we believe that increasing trend of international fertilizer prices will remain in coming years FFBL’s Gross Profit Margin has strongly improved. FFBL reported 16% decline in gross profit as company earned a gross profit of Rs 758 million. during the quarter. healthy growth rates in revenues. Owing to the plant shut down for BMR and gas curtailment and higher cost of goods manufactured. urea and DAP production remained low. FFBL has been experiencing a remarkable surge in profitability in the last couple of years.000 5. As indicated distribution cost is being increased by 17% due to increase in fuel cost (i-e. Moreover compensation from GOP has resulted in improvement of bottom line growth.5 0 02 03 04 05 06 07 08 -0. PAT Grow th 1. Further more FFBL is the only company in the sector with fixed gas feedstock prices till 2009. 10% in FY07 and FY08 respectively. and ammonia plant BMR last 4-years have shown a sustained and stable growth in FFBL production volumes and urea production volumes are remained sustained at cumulative average growth rate 2% and company achieved the 149% CAGR for DAP production volume International prices of urea and DAP likely to grow @ 5% in FY06. from Rs 272 million to Rs 317 million).FFBL & ENGRO Profitability Analysis Sale s 25. unique product of Granular Urea (Sona Urea) and DAP in Pakistan. FY05 saw FFBL reap prosperous windfalls on all counts. operating profits.000 15.5 1 0. while judge against to Rs 878 million during the same period last year. Further FFBL has been operating at more than 100% capacity utilization rate due to high demand in the country. Company total sales are increased by 35% on basis of 3-years CAGR and urea sales growth stands at 10% for 4-year CAGR and 161% for DAP. On account of feed stock subsidy and higher urea prices margins has also improved.

00 0. The risk free rate is assumed at 9. We are also positive about the dividends.00 2.23 for FFBL.50 2. With these variables.50 1. we expect 20 percent final dividend for the company to be announced for FY06. while contrast to 1QFY05. we recommend a buy for the company scrip. (i-e from Rs 50 million to Rs 99 million) and its percentage of sales is 2% mainly due to higher interest and KIBOR rates.35 percent in line with current PIB yields. and long-term debt are included in a WACC calculation. six years other income CAGR is 46% which is a remarkable growth in dividend income and it is increased from (Rs 87 million to Rs 137 million) due to increased profit rates. With our calculated WACC and keeping in view the growth rate.50 2. EPS 3. HT TH HT TH Dividend Yield 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% FY02 FY03 FY04 FY05 FY06 FY07 FY08 Page 10 of 24 . we have arrived at a fair value of Rs 41.8. The net profit after tax is expected to grow to Rs 2.50 0.00 1.00 0. Our calculated beta is 0.00 FY02 FY03 FY04 FY05 FY06 FY07 FY08 Recommendations We are positive about the future performance of FFBL. After discounting the projected free cash flows we have calculated the firm's cost of capital in which each category of capital is proportionately weighted. On the basis of this fair value.81 and our rate of return on equity is thus calculated as 11. Keeping in view a 5 percent increase in EPS.6% and it is being increased 1% in FY05 as compared o FY04. our calculation of the weighted average cost of capital reveal a rate of 5. However.79 percent. We are expecting further increase in financial charges as company borrowed heavily due of under going expansion plan.00 2.00 1. Average (FY02-05) was 27. common stock.00 FY02 FY03 FY04 FY05 FY06 FY07 FY08 DPS 3.Financial cost increased by 98%. The company has maintained a good payout ratio of 75% percent.50 1.580 million for FY06 and the expected earning per share for the same period is Rs 2.We foresee FFBL will maintain bottom line growth at the constant pace but due 27 days production shut down for BMR they will unable to achieve any remarkable growth.50 0. All capital sources.5 percent.50 3. P t Ratio ayou 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% FY 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 Valuations We have assumed a 3 percent risk premium for our valuations.FFBL & ENGRO We expect that margins will decreased by 10% during FY06. The upside potential is currently around Rs 30 and the potential return is 37 percent at current levels.

0 2.580 1.07 2.65 26% 8% 12% 11% 3.130 34% 55% 34% 24% 30% 34% 8% FY06 16.27 32% 10% 16% 15% 24% 76 4.Adjusted 4.353.1 2.840 2304 2.59 30% 11% 18% 18% 22 78 4.8 2.202 PAT Incl: Compensation 979 135 Taxation Production/Sales Performance (000 Tones) 547 560 FFBL Urea Production 530 575 FFBL Urea Sales 73 FFBL DAP Production 71 FFBL DAP Sales 947 FFBL DAP Import Sales Financial Performance 809.00 2.96 8.9 Total Number of Shares 2.657 1.27 8.428 2057 2.6 2.452 1.240 2.0 3% 9% 3% 9% 2% 3% 7% FY08 19.27 10.70 6.597 3.27 30% 12% 21% 19% 22 78 4.3 EPS 2.465 588 588 454 430 64 934.179 3.170.Adjusted ROE ROA ROFA ROCE Retention ratio Payout Ratio EBITDA Growth PAT Growth PAT Growth Excluding GoP Compensation PAT Growth Including GoP Compensation Sales Growth EBITDA Growth EPS Growth Sustainable Growth 56% 11% 13% 13% 1.1 3.0 7.65 7.9 909.8 2.191 3.1 3.241 1880 2.393.08 6.1 2.302.017 574 580 380 381 836 934.903 3.953 FY03 5.217 1752 2.22 9.07 8.1 2.756.42 2.514 3.3 1.904 1.8 2.60 BVPS 4.429 3.3 9% 12% 9% 11% 8% 9% 7% Net Sales Revenue 435 499 Operating Profit 154 367 PBT 1133 502 PAT 2.150 1133 1.167 FY04 11.462 2.1 53% 126% 53% 122% 124% 49% 0% FY05 14.417.FFBL & ENGRO 7-Years at a Glance FY02 3.3 EPS .833 1.536 676 623 681 469 69 934.1 2.133 1.6 1.96 31% 10% 17% 15% 25% 75 4.8 2.0 20% 6% 7% 7% 1.22 2.Adjusted DPS DPS .519 3.6 2.59 9.254 3.00 8.1 2.361 588 593 454 434 64 934.42 10.5 5% 7% 5% 14% 4% 5% 8% FY07 17.43 BVPS.371 676 605 681 447 65 934.3 -44% -56% -44% 31% 5% -50% 0% - Page 11 of 24 .

30 7.27 5.00 3.00 2.60 FY03 1.95 3.59 4.09 32% 20% 24% 20% 15% 24.47 13.90 3.60 FY04 1.54 8.70 1.94 9.34 3.07 3.81 6.6% 0% 15.FFBL & ENGRO Share holder value FY02 EPS DPS GCFPS FCFPS BVPS EBITDA Per Share Profitability 2.59 8.70 31% 20% 25% 20% 15% 13.09 6.76 2.11 2.75 FY06 2.61 31% 21% 27% 21% 16% 9.81 8.12 8.77 8.00 3.20 3.52 23% 10% 27% 10% 23% 3.42 32% 22% 29% 22% 17% 12.70 1.96 4.96 10.18 32% 10% 21% 58% 89% 3.49 30% 12% Page 12 of 24 .77 1.02% 7% 8.84 2.25 4.30 35.05 FY05 2.38 9.00 2.96 4.22 3.65 3.20 6.92 56% 11% 10% 63% 69% 3.20% 0% 23.65 30% 11% 20% 60% 96% 2.02 4.45 26% 11% 34% 11% 54% 1.27 4.33 0.tax rate 1 .22 20% 6% 20% 53% 96% 3.23 24.78 4.04 31% 10% 20% 60% 92% 2.02 Gross Margin Operating Margin EBITDA Margin EBIT Margin Net Margin Interest Cover Dividend Yield Equity Valuation PE (x) PE Market (x) PE relative to market (%) P/GCFPS (x) P/FCFPS (x) P/BVPS (x) DuPont Analysis EBIT Margin 1 .42 4.39 18.23 FY08 3.62 8.80 10.63 3.60 1.39 28% 20% 28% 20% 16% 26.36% 0% 11.84 6.94% 8% 7.70 1.63 0.62 2.32 0.96 0.23% 7% 10.48 7.71 10.(1/ interest cover) Assets Turnover Financial Leverage Return on Equity Return on Assets 11% -535% 26% 4.% 7% 11.02 2.46 FY07 2.07 26% 8% 22% 54% 92% 3.

particularly Nitrogen & Phosphates Demand. Financial Performance Face Value: Book Value (2006F): EPS (2006F): Outstanding Shares (mn): 10 74 26.89.FFBL & ENGRO Sell on Strength Fair Value: Rs Fly in the Face of Facts Recommendations Assuming the 4% YoY Agriculture Sector Growth. We seem that Pakistan dairy industry is less saturated and Engro foresees great opportunities in the dairy market industry. Engro is a public limited company listed on the Stock Exchanges of Karachi. good organization and productivity to humanizing the production methodology. 6% Fertilizer Sector YoY Growth.794 6. Engro chemical as part of its vision to diversify its business has successfully launched of its first product UHT milk under the brand name ‘OLPERS’.37X 5. 184 ENGRO CHEMICAL PAKISTAN Overview Engro Chemical Pakistan Limited is the second largest producer of Urea fertilizer in Pakistan. We also believe that the company is going to announce a dividend of Rs16 of its prospective earnings which leads to an attractive yield of 7% making ECPL even more captivating for medium & long term investment. Lahore and Islamabad. when Exxon decided to divest their fertilizer business on a global basis and sold off its equity of 75% shares in our company. in partnership with leading international and local financial institutions bought out Exxon’s equity and the company was renamed as Engro Chemical Pakistan Limited. 10% Fertilizer products. The Employees of Engro. We are positive about the future performance of ECPL The net profit after tax is expected to grow to Rs… million for FY06 and the expected earning per share for the same period is Rs28. ENGRO effectively materialize a diversification strategy which will generate profits and operating strategies focal point is to acquire dependability. ECPL has been on track with respect to twofold the existing capacity all the way through establishing the state of the art ammonia plant. Investment Foundation The year 2006 brings inspiring opportunities for the country. growing fertilizer make use of and scene of better water accessibility for irrigation in this angle ENGRO Chemical would play a dynamic role in upcoming years. Improvement in the economic fundamentals and the attitude of hopeful agriculture augmentation. To envisage the elevated demand of fertilizer. & 24% ECPL sales revenue & strengthen product base in locally manufactured and purchased fertilizer products we recommend to Sell on Strength ECPL with a target price of Rs185 over the next three years we expect the bottom line of the company to increase by 11% ECPL is currently trading at Rs 174 lower than its calculated DCF fair values Rs184 thus offering of Rs10 upside potential.5X 12.9 152.20X Page 13 of 24 .94 Price Performance Market Capitalization (mn): ECPL PE Sector PE ECPL PB Sector PB 21. In the medium and longer term EFL’s business is expected to be a high growth and profitable business.7X 3. The company was incorporated in 1965 and was formerly Exxon Chemical Pakistan Limited until 1991.

000 tons in 1966. Gas allocation has been made by the government from Qadirpur field. (INET).e. The plant capacity is expected to be approximately 200 MW. 2000 General Parvez Musharaf. Another innovative and modernization project called “Energy Conservation and Expansion Strep” (ECES-850) was successfully implemented in 1998. The company successfully engineered and implemented an expansion program that gave a major boost to the urea production and its capacity increased to 850. 2003 Engro acquired controlling interest in the Automation & control Division of Innovative Private Ltd. 1999 the Prime Minister of Pakistan Mian Muhammad Nawaz Sharif formally inaugurates the 850KT expansion project at Daharki urea plant. On August 9th.000 tons per annum with an investment of US$ 23 million in 1995. The construction of a urea plant was completed and commissioned at a cost of US$ 43 million in 1968. P P • • • • • • • Page 14 of 24 . The plant capacity was debottlenecked in low cost steps to 268.FFBL & ENGRO ENGRO CHEMICAL PAKISTAN LIMITED Historical Events • • • • • • • • • The construction of a urea plant was started with the annual capacity of 173. The new company will be called Innovative Automation & Engineering (Private) Limited headquartered in Lahore. with an investment of US$ 130 million. Engro Energy (Private) Limited formed. 600.000 tons in 1993.000 tons. entered into its second 50/50 joint venture called Engro Asahi Polymer & Chemical Limited (EAPCL) Company in collaboration with Asahi Glass Company and Mitsubishi Corporation of Japan to build the first world scale PVC resin manufacturing facility at a cost of US$ 80 million. the Chief Executive of Pakistan inaugurates Engro Asahi Polymer & Chemicals PVC resin manufacturing plant at Port Qasim. A full-fledged marketing organization was established and given the important task of effective marketing and commencing agronomic programs to educate the farmers of Pakistan in 1968. Engro Foods (Private) Limited launched UHT Milk under the brand name of Olper's in first quarter 2006.000 tons in 1990.000 ton per annum in 1996. The Pakven Project was launched. On March 9. On February 9th. Engro signs an MoU with Oman Oil Company to build an ammonia urea fertilizer complex in Oman.000 to 850.The project was constructed at a cost of US$ 72 million and had increased Engro’s annual urea production capacity from 750. Engro entered into first 50/50 joint venture with Royal Vopak of Netherlands to form and built a fully-integrated state-of-the-art jetty and bulk liquid chemical and LPG storage facility at a cost of US$ 65 million in 1995. to increase its capacity to more than double i. This also helped to relocate urea/ammonia plants from UK/USA. 2002 Engro’s NPK fertilizer plant at Port Qasim inaugurated by two Federal Ministers and on October 9th. April 28. The plant has been erected at Sukkur at a cost of approximately Rs 1 Billion. On October 10th 1997. The plant capacity was further increased to 750.

U U Page 15 of 24 . which is higher than any other available brand in the market. This is the first Project undertaken by any company in the manufacturing of PVC. Maize Sugar cane. which is a little over 50km from the city of Karachi in Pakistan. The plant is located at Port Qasim. Joint Ventures & Diversification Plans Engro Vopak Terminal Limited (EVTL) is a 50/50 UH Engro DAP contains 46% P2O5 and 18% N. Asahi Glass Company (AGC) and Mitsubishi Corporation (MC). It is available in a 3kg SKU and contains guaranteed 33% (minimum) water soluble zinc content. Various Grades of Zarkhez Innovative Automation & Engineering (Private) Limited (IAEL) was acquired in April 2003 with 51% UTH Grades Blends Green Crops used on 08 : 23 : 18 Potato. 30%. On an overall basis it suits to about 90% soils of the country Engro Zorawar is one of the highest grade phosphate fertilizers. Apples. A PVC resin manufacturing facility plant with an initial capacity of 100. cream and other milk products. whereas fertilizer application on the standing crop is called "top dressing". HTU Company and Mitsubishi Corporation of Japan. Pink 08 : 18 : 20 Vegetables Blue 17 : 17 : 17 Citrus. Engro Asahi Polymer & Chemicals Limited (EAPCL) is a 50/50 joint venture with Asahi Glass UTH EZingro is a powerful brand whose product attributes help in increasing the number of flowers and fruit in a plant and is an essential nutrient for all crops Zingro Danedar Zingro Danedar is used for soil application and is widely used on a majority of crops. Wheat Mangoes. Grey 18 : 09 : 18 Bananas interest in the Automation & Control Division of Innovative (Private) Limited. Ltd. Zingro Spray is used for foliar application and is used on crops that are best suited for spray applications. EVTL has a developed experience and specialization in handling different types of chemicals and liquefied gases. The equity stakes of the above mentioned companies are 50%. All major equipment is on order and civil construction is expected to commence soon. HTU joint venture with Royal Vopak of the Netherlands. T T T T UHT Milk Plant Engro has set up a milk processing facility to produce and market branded UHT milk.000 tons per annum at Port Qasim. The joint venture has been named as Innovative Automation & Engineering (Private) Limited (IAEL). HU Subsidiaries. it was acquired by Engro Chemical Pakistan Ltd (ECPL) to form an ECPL subsidiary. The acquisition was part of Engro’s diversification strategy. Engro NPK was re-launched as Engro Zarkhez in May 2004. Fertilizer application at the time of seed sowing is called "basal". Chillies. IAEL commenced as a business division of Innovative Pvt. The company continues to actively pursue opportunities to expand and diversify its terminal operations in the region through value added services. NPK fertilizer is applied at various times during crop's life cycle. a global provider of independent tank terminal capacity for chemical and oil products. Engro plans to procure raw milk supplies from Sindh and lower Punjab. EVTL owns and operates a jetty and integrated bulk liquid chemical and LPG storage at Port Qasim The company has facilitated investments of US$ 1 Billion in the Pakistani chemical industry and is ISO 9001 / 14001 / 18001 and CDI-T certified. In April 2003. Engro Asahi Polymer & Chemicals Limited (EAPCL) is a joint Venture Company set up by Engro Chemicals Pakistan Limited. It is available in a 350gm SKU and contains guaranteed 33% (minimum) water soluble zinc content. a Lahore (Pakistan) based company that provides process control industrial solutions in the knowledge based services sector. electric engineering & process control systems for the local industry. Other fruits White 12 : 15 : 20 Tobacco Yellow 10 : 28 : 10 Rice. The plant to be located in Sukkur is expected to cost Rs 1 billion and will be completed by March end 2006. and 20% respectively. (IPL) in July 1995 to implement industrial automation. cotton.FFBL & ENGRO Product Categories Engro Urea is an excellent source of Nitrogen for the vast majority of cultivated soils of Pakistan. It is a good fertilizer for all crops on all soils of Pakistan and produces excellent results on alkaline soils.

They also produce crop specific NPK fertilizers at plant of Port Qasim Karachi and these are marketed under the brand name of "Zarkhez". To make sure.1% Total Gas Allocation: 103 MSCFD Engro Share Performance 300 250 200 150 100 50 0 1 52 103 154 205 256 307 358 409 460 511 562 Engro Pices KSE 100 Index Furthermore as for as our financial projections are concerned. we have not incorporated expansion impact in our hypothetical assumption and model but we believe that. for the base plant alone. Gas prices have been increased twice during the year and feedstock gas rates total surge in gas rates (feed and fuel) for the fertilizer industry stood at 22.FFBL & ENGRO ENGRO Core Business Strategies Engro is an agri based company. Engro also markets imported MAP fertilizer under the brand name of "Zorawar" and imported DAP fertilizer. total cost of project. Engro is Pakistan’s one of the largest producers of urea fertilizer which is manufactured at Daharki and marketed under brand name Engro. Page 16 of 24 . P P Key Statistics Bloomberg: ENGRO PA KATS: ENGRO Price: PKR 177 (Prices on 25th July 2006) P P Estimated Free Float: 69% 3m Avg. maximizing their farm produce by providing quality plant nutrients and technical services upon which they can depend. Purchasing by far one of the largest single functions performed at ENGRO. technical expertise. The company also markets micronutrients Zinc Sulphate branded as "Zingro" and Boron branded as "Zoron".5%. and debt/equity ratio. P P Latest Climb of Feed stock The fertilizer sector is the second largest gas end user in the country after the energy sector. GoP has asked the interested parties to submit statement of Qualification (SoQs) latest by 15th Aug 2006 which must include the detail of financial position. Traded Value: PKR …Million 12 Month High/Low: PKR 150/89. major shareholding infrastructure. utilizing roughly 23% of annual gas production and continues to be affected by gas price revisions.30 Major Shareholder: Dawood Group 24% KSE-100 Index Weight: 1. ECPL involved in an annual purchases of over US $ 55 million. Gas Allotment – Better Late Than Never Engro obeyed the rule of Fertilizers Policy 2001 and applied first for feedstock provision. Core business of ECPL is manufacturing and marketing of chemical fertilizers. sustained and efficient fertilizer plant operations and to cater to the proposed expansion and diversification. History Engro Chemical Pakistan Ltd (ECPL) was established to help farmers. after decision of gas allocation to Engro for setting up a Ammonia plant in Daharki would more or less twice over Engro’s urea production capacity by 3rd quarter FY09.

the production was 157 thousand tones stand for an increase of 30% while compared to Zarkhez production achieved last year. For this percentage Zarkhez plant at present utilizing 157% production capacity. ENGRO urea production design capacity is 850 thousands tones but its production during FY05 was 912 thousands tones represents 5% increase over FY04. Opportunities • • • Rising industry demand trends Higher fertilizer prices Export opportunity in Asian countries Zarkhez Production Capacity Boiler plate Zarkhez plant capacity is 100 thousand tones.FFBL & ENGRO ENGRO SWOT Breakdown Strengths • • • • Performance based management Multidimensional diversification strategies Strong marketing activities Continuous improvement & quality management ENGRO Urea Production Capacity ECPL has remained in the midst of the industry when it comes to enhancing the production capacity. Unquestionably. NPAT will be considerably enlarged and market share of ENGRO will jumps to 50% just after expansion. Threats • • • • • • • Strong competition Commencement of Fatima Fertilizers Rising Feed stock & Fuel prices Gas Curtailment Delay in Gas Allocation Weather & Environmental Conditions Use of substitute products Page 17 of 24 . During the FY05. Weaknesses • • Shareholder influence Burning candle from both ends Expansion (1FY09) – Consciousness Continues Expansion of world scale urea plant in Daharki is not yet to be decided and its construction is mainly subject to gas allocation decision by the GoP. ENGRO eagerly linger for the final decision. ECPL continuously has undertaken a harmonizing measure to attain maximum utilization capacity. True that the demand has been towering and the local industry was not able to convene the demand. 57% above to name plate capacity.

The CAGR of the purchased volume for the past ten years stand at 5%. In 1966 company had annual urea design capacity was 173 thousand tones but on hand ECPL per annum urea design capacity is 850 thousand tones.Engage in Recreation Urea Design Capacity 1.. Decline in the manufacturing gross margins indicate that cost of sales is increased at very high rate. ECPL also markets the imported MAP fertilizer under the brand name ‘Zorawar’ and imported DAP fertilizer. Witnessing the balanced used of fertilizer nutrients in the country and increasing demand/supply gape creates intense opportunity for fertilizer manufacturers to reap profit margins.000 800 600 400 200 0 FY0 2 FY0 3 FY0 4 FY0 5 FY0 6 FY0 7 FY0 8 115% 110% 105% 100% 95% 90% Since. Likewise. Page 18 of 24 .FFBL & ENGRO ENGRO . last 10-years ENGRO is being engaged in uninterrupted enlargement of its share value and have shown unrelenting and solid ideas. Over a decade. For 1QCY06 profit margins register a enlargement of 22% as compared to same period last year. the cumulative average growth rate of urea production stands at 2% and company achieved the 38% CAGR of Zarkhez (NPK) production volume. As for as company sales growth is concerned ECPL’s 10-year sales volume CAGR is 2% and 43% for Zarkhez (NPK). The gross margins on ENGRO manufacturing business have been all time higher than that of its trading and marketing business. Gross margin for FY05 stands at 21 percent 5 percent less than that for gross margins achieved by FY04. 2002 Engro’s NPK fertilizer plant at Port Qasim had started its production with initial production capacity of 100 thousand tones per annum. Urea Design Capacity Utilization(%) Zarkhez Design Capacity 120 100 80 60 40 20 FY0 2 FY0 3 FY0 4 FY0 5 FY0 6 FY0 7 FY0 8 200% 150% 100% 50% 0% Zarkhez Design Capacity Utilization(%) Success Story Witnessing the fertilizer demand and its shortfall in the country creates intense opening for fertilizer manufacturers to reap vigorous windfalls. Engro takes an opportunity of capitalizing on the huge unexplored potential of NPK fertilizer and on August 9th.

company has to register a 12% increase in sales during FY06. We expect the positive growth of EVTL in coming years and dividend income will increase the earnings of Engro.94 percent. Gross Margin. EACPL. To ensure. IAEL EVTL showed the 3 year 25% CAGR. EACPL is making feasibility for expansion and back integration which is likely to be completed during FY06.% higher than FY04. We expect that the company would keep up this ratio in the get up of rising EPS for FY06 and the expected earning per share for the same period is Rs16.Bottom Line 14% 12% 10% 8% 6% 4% 2% 0% Disbursement The company has maintained a balanced payout ratio at an average of 45 percent. company will obtained the target of Rs 20.million ….FFBL & ENGRO ECL research forecast the same growth pattern of ENGRO bottom line.Top Line 35% 30% 25% 20% 15% 10% 5% 0% FY02 FY03 FY04 FY05 FY06 FY07 FY08 Operating Margin 25% 20% 15% 10% 5% 0% FY02 FY03 FY04 FY05 FY06 FY07 FY08 Earning commencing from EVTL. unrelenting and proficient operations of the fertilizer plant and trade with suppliers and manufacturers for improving effectiveness of its Supply Chain Management and building a long term business partnership. ENGRO 6 Years revenue CAGR is 16% and sales for the FY05 grew by 11%. We are also optimistic about the dividends and according to our expectations ENGRO will declare 55 percent final dividend for FY06. The company for the FY05 declared 50 percent final dividend compared to 40 percent in FY04.year …% CAGR and paid cumulative share amounted to Rs 134 million in FY05 first time. EACPL registered a …. Company achieved the Profit after tax for FY05 …. EVTL has paid 60% average dividend to Engro so far. 05 03 04 06 07 02 08 Net Margin . We view that.74. We view that. FY FY FY FY FY FY EBITDA Margin 30% 25% 20% 15% 10% 5% 0% FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY Page 19 of 24 . For 1QCY06 net sales registered a growth of 19% as compared to same period last year.344 million profit after tax for FY06 and PAT CAGR (FY06-08) should be 8.

FFBL & ENGRO Assessment EPS 20 15 10 5 0 FY02 FY03 FY04 FY05 FY06 FY07 FY08 We have assumed a 3 percent risk premium for our valuations.54 percent. we recommend a Sell on Strength for the company scrip. With our calculated WACC and keeping in view the growth rate. On the basis of this fair value. common stock. and long-term debt are included in a WACC calculation. our calculation of the weighted average cost of capital make known a rate of 6. All capital sources.75 percent at current levels. A growth rate of 4 percent is assumed for valuations. Our calculated beta is 0. The risk free rate is assumed at 8 percent in line with current PIB yields.18 and our rate of return on equity is thus calculated as 8. After discounting the projected free cash flows we have calculated the firm's cost of capital in which each category of capital is proportionately weighted. With these variables. HT TH HT TH DPS 25 20 15 10 5 0 03 04 06 05 02 07 FY FY FY FY FY FY BVPS 60 50 40 30 20 10 0 FY 08 Dividend Yield 12% FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 FY 02 10% 8% Payout Ratio 120% 100% 80% 60% 40% 20% 0% 6% 4% 2% 0% 02 03 04 05 06 07 FY FY FY FY FY FY FY 08 03 04 05 06 07 FY 02 FY FY FY FY FY FY 08 Page 20 of 24 .7 percent. The upside potential is currently around of Rs10 and the potential return is 5. we have arrived at a fair value of Rs 184 for ENGRO Chemical Pakistan Limited.

9 157 150 520 153 17.4 139.492 520 65.8 157 157.94 8.22 48.9 FY06 20.03 27% 12% 22% 16% 152.630 3.555 2.530 1.50 8.865 823 75.084 562 2. Plant Equip Capital Expenditure Long Term Investment Long Term Loans & Advances Shares Outstanding DPS (Rs) Dividend Payout Rate Bonus Shares Engro Urea Production (MT) Engro Urea Sales Zarkhez Production Zarkhez Sales Purchased Fertilizer sales 10.07 34.94 15.471 1.23 33.50 43.498 66.5 104% 10% 852 846 73 64 309 153 8.49 0.884 2.00 37.323 1.37 105% 912 899.94 10.94 10.89 8.2 15.Adjusted BVPS BVPS.07 0.9 FY08 26.220 2.344 2.23 10.24 17% 5783% 17% 152.315 1.305 2.34 34.49 34.798 2.0 7.648 370 85 51.9 105% 912 904.836 1.0 73% 912 890 157 143 491 153 15.611 704 6.26 20% 6323% 19% 152.614 2.03 37.3 FY07 22.848 3.89 34.2 11.534 2.8 157 165.06 24% 12% 23% 16% 152.94 8.Adjusted DPS DPS .5 8.9 FY04 12.5 10.00 8.641 3.62 33.9 8.801 2.560 995 665 2.1 8.330 2.351 377 748 65.Adjusted ROE ROA ROFA ROCE 139.62 0.85 21% 12% 152.319 900 6.9 95% 912 894.2 7.94 8.233 2.2 8.758 3.18 10.6 FY05 18.50 6.1 8.54 8.0 8.598 99.22 31% 16% 34% 21% 152.557 766 6.276 2.26 16% 6329% 24% Page 21 of 24 .998 66.5 590 Comparative Analysis Total Number of Shares EPS EPS .2 FY03 11.06 43.027 3.133 703 6.82 38.5 81% 870 891 121 114 250 153 11.0 79% 955 930 72 86 290 153 8.327 1.7 562 153 16.FFBL & ENGRO Performance Measurement Tool FY02 Net Sales Revenue Operating Profit PBT PAT Taxation Property.00 11.9 10.620 2.00 48.54 34.9 8.984 2.4 7.9 8.

23 8.16 11.40 Per share EPS DPS GCFPS FCFPS BVPS EBITDA Per Share Profitability Gross Margin Operating Margin EBITDA Margin EBIT Margin Net Margin Interest Cover Dividend Yield 33% 21% 26% 21% 10% 15.40 404.18 8. Days Inventory Days Receivable F Charges/EBIT Growth Sales Growth EBITDA Growth EPS Growth GCFPS Growth Assets Growth PAT Growth 8.17) 33.90 (4.75 5% 20% 11% 13% 11% 5% 16.00 15.75 36.50 11.79 2.89 8.90 10.35 26 1.0 11% 30% 16% 44% 7% 44% 15.28 13% 5% -10% 3% 2% 37% 10.39 11.62 117% 54% 56% 302% 0.82 5% 21% 14% 14% 14% 13% 9.22 5% 9% 8% -41% -53% -41% 8.49 18.52 10 0.30 399.FFBL & ENGRO Retention ratio Sustainable Growth Payout Ratio 8% 92% 21% 6% 79% 19% 5% 81% 27% 9% 73% 5% 2% 100% -5% -2% 105% -5% -2% 115% Balance Sheet Quality Gearing .44 34.58 6% 0.13 8.48 Efficiency Inventory Turn.53 8.62 17.57 3% 10.17 11.95 5% 26% 17% 18% 17% 13% 7.40 208.07 18.TD/Net worth Debt / Equity Equity / Debt Total Debt / Total Assets Asset Turnover Current Ratio 100% 50% 74% 42% 7% 95% 0.54 11.50 10.22 17.03 16.52 48.74 37.18 42.51 10 0.73 499.85 19.79 309.58 70% 41% 13% 322% 0.00 0.59 6% Page 22 of 24 .48 43.21 2% 15% -6% 9% 11% 9% 8.33 32 1.18 13.08 5% 20% 10% 10% 10% 5% 59.15 7.27 99% 50% 59% 302% 0. Turn.92 62% 38% 7% 130% 0.90 36.75 36.40 6% 11% 0% -9% 13% -9% 8.53 262.36 10 0.85 18.40 485.16 19. Rec.22 34.54 34.80 4% 32% 21% 21% 21% 13% 10.43 7% 20% 12% 14% 12% 7% 20.89 11.66 20.53 10 1.91 38.00 10.24 9% 11% -10% 37% 65% 39% 5% 97% 0.06 14.

55 18.30 12 1.45 3.54 -39.91 10% 65% 98% 322% 1.56 12 1.21 3.54 12 1.tax rate 1 .31 15.46 21% 67% 91% 95% 2.FFBL & ENGRO Equity Valuation PE (x) PE Market (x) PE relative to market (%) P/GCFPS (x) P/FCFPS (x) P/BVPS (x) 20.30 21% 62% 94% 21% 16.89 14.27 27% 12% 15.77 14.47 3.86 4.88 12 0.67 12 1.55 14.15 8.78 11% 70% 94% 302% 1.88 8.83 17% 70% 87% 97% 2.53 4.42 14% 72% 89% 130% 1.69 14.42 24% 17% 18.25 7 2.00 67.00 24% 12% 10.62 26% 16% DuPont Analysis EBIT Margin 1 .64 4.21 8.(1/ interest cover) Assets Turnover Financial Leverage Return on Equity Return on Assets Page 23 of 24 .84 12% 72% 95% 302% 1.30 4.16 4.91 10.21 10 1.91 31% 16% 18.62 16.27 26% 20% 20.

134 Million Innovative Automation & Engineering (Pvt) Limited (IAEL) Joint venture company Equity Held Basis Operation Volume Handling Capacity FY05 PAT Dividend Paid for FY05 ENGRO share of dividend payout Royal Vapak of Netherlands 50% Owns & operates liquid chemical & LPG terminal at Port Qasim 885.270 million .FFBL & ENGRO Joint Ventures & Subsidiaries – Technical Details ENGRO Vopak Terminal Ltd (EVTL) Joint venture company Equity Held Basis Operation Volume Handling Capacity FY05 PAT Dividend Paid for FY05 ENGRO share of dividend payout Royal Vapak of Netherlands 50% Owns & operates liquid chemical & LPG terminal at Port Qasim 885.000 Tones 438 million 60% Rs. ECL and its employees bear no liability for any direct or indirect consequential loss arising from use of this report. All facts and figures have been taken from the sources that are considered reliable.270 million ENGRO Asahi Polymer & Chemical Ltd (EACPL) Joint venture company Equity Held Basis Operation Production Volume FY05 FY05 PAT FY05 Domestic & Import Sales Dividend Paid for FY05 ENGRO share of dividend payout Asahi Glass & Mitsubishi Corporation Japan 50% Manufacturing & Marketing of PVC Resin 91.000 Tones 15% Rs.000 Tones 438 million 60% Rs. Page 24 of 24 .com Important Disclaimer: This report has been prepared for information purpose only. Cell: 0301-3810391 / 0301-8278367 Tel: 071-5620965 / 071-9310685 Email: somimemon24@yahoo.000 Tones 438 Million 94. Salman Bashir Memon Financial & Research Analyst Regional Portfolio Manager Eastern Capital Limited Sukkur. The view and opinions expressed in this report do not guarantee any accuracy or completeness.

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