Initial Public Offer - PABC

June 11, 2021

Pakistan Aluminium Beverage Cans Limited

Classic example of Warren Buffet’s
economic moat

Best Equity research report (Runner up) – 2020

Best Equity Trader (Runner up) – 2019

Abdullah Umer abdullah.umer@ismailiqbal.com Phone: (+92-21) 34302184, Ext: 406 1

Initial Public Offer - PABC
Classic example of Warren Buffet’s economic moat June 11, 2021

Pakistan Aluminium Beverage Cans Limited (PABC) is set to list on PSX through an IPO, where we
recommend investors to subscribe up to a strike price of PKR 45/share, offering 20% upside to our Subscribe up to PKR45/share
estimated intrinsic value of PKR 54/share (blended valuation of P/E & DCF). The IPO would be different in
nature as there would not be any capital raised but only a change of hands in the ownership. Our Fair Value of PKR54/sh.
investment thesis revolves around i) Growth potential in both local and exports market, ii) Robust pricing offers an upside of 54%/20%
power as major raw material costs are pass through, iii) low CAPEX requirements for further expansion, from floor/recommended
and iv) beneficiary of rising ESG focus of beverage companies and investors. subscription price
A growth play: Pakistan beverage market is expected to grow at a CAGR of 7-8% between 2021-2025 (as
per a report by Euromonitor). PABC is the sole producer of beverage cans in Pakistan and has largely
Cap Price: PKR Floor Price: PKR
substituted imported cans (~99%), thus, we have assumed local cans demand to grow in line with the 49/share 35/share
beverage market. However, Pakistan has one of the lowest cans penetration rate of 3.6% in the world
Key highlights CY20 CY21E CY22E CY23E
against global can penetration of 19%. For a 50bps increase in penetration, the can demand can go up by
Effective capacity - mn cans 600 600 850 850
130mn cans (22% of CY21 capacity).
Capacity uitilization 74% 96% 76% 85%
Exports mix 43% 52% 50% 52%
Geographic diversification to reduce reliance on Afghanistan: Apart from catering 50% market share in EPS 1.7 3.7 5.0 6.2
Afghanistan, PABC has recently started to export in USA & Tajikistan. In the coming years, PABC is DPS - - - 3.0
expected to further diversify its exports in Bangladesh (Cans demand: 150mn) and Iraq (demand: FCFE/share 0.5 0.5 0.7 4.2
500mn) along with other Central Asian countries (demand: 400mn). This would benefit amid rising BVPS 8.7 12.4 17.4 20.6
security tension in Afghanistan, which could potentially hurt exports, if the situation escalates. P/E 20.7 9.5 7.0 5.6
P/BV 4.0 2.8 2.0 1.7
Exports to bring next leg of growth: The export volumes are expected to increase by 77% in CY21 to Dividend Yield 0.0% 0.0% 0.0% 8.6%
303mn cans, where the major growth is expected from new markets (USA and Tajikistan). The company Earnings growth 319.2% 118.3% 35.0% 24.9%
expects exports to Afghanistan at 190mn cans vs 187mn/171mn cans exported in CY19/CY20. Thus, most ROE 21.5% 35.0% 33.5% 32.8%
of the expected growth is going to come from new markets. This would also increase the export sales ROA 6.9% 13.9% 16.7% 19.6%
mix to 52% of the total sales volume in CY21 vs 43% in CY20. Source: Company Accounts, IIS Research
Note: Floor price used for ratios

Abdullah Umer abdullah.umer@ismailiqbal.com Phone: (+92-21) 34302184, Ext: 406 2

Initial Public Offer - PABC
IPO Overview: Change of hands June 11, 2021

Ashmore Mauritius PAC Limited is selling its 51% stake in Pakistan Aluminium Beverage Cans limited
through offer for sale (IPO) & private placement. The public offer constitutes 25% of the total, while Current share holding pattern
private placement would account for 26%. The public offer would comprise 93.88mn shares at a floor
price of PKR 35/share with a maximum price of PKR 49/share. Initially, 75% of the Offer size i.e.
70,416,000 Ordinary Shares will be allotted through book building to successful bidders and 25% of
the offer i.e. 23,472,000 Ordinary Shares will be offered to retail investors. Along with this, through
private placement, the company will sell 18.05mn (5% stake) shares to Mrs. Hamida Salim Mukaty 49% 51%
(Liberty group) at a price of PKR 30.80/share and 72.22mn shares (20% stake) to ‘Soorty Enterprise
(Pvt) Limited’ at a price of PKR 31.85/share. The bidding period shall be of two working days (22-Jun-
21 to 23-Jun-21).

Purpose of offer: Primary purpose of this Offer for sale of shares by the sponsor is to divest and list Ahsmore Mauritius PABC Limited Liberty Group Pakistan

the company on the PSX with an aim to diversify company's current shareholder’s base.
Post OFS
Sponsor details: Ashmore Investment Management Limited is a UK based specialist Emerging
Markets investment manager with over 25 years of experience in these markets. The company has
26%
previous experience in establishing Aluminium cans manufacturing plants in Nigeria, and Myanmar.
Through its associated company, i.e. Ashmore Mauritius PABC Limited, the company has set up
Pakistan Aluminium Beverage Cans Limited in Dec-14. During the project construction phase in 2016, 54%
Pakistan’s Liberty group invested into the company with an equity injection of PKR 2.5bn (i.e. 49%
stake). 20%

Local sponsors: Established in 1908 in Karachi, Liberty Group is a leading name in Pakistan's textile Liberty Group Pakistan Soorty Enterprise (Pvt) Limited
and power sectors. In the power sector, the Group operates a 200MW furnace oil power plant in General public
Faisalabad. PABC's second local sponsor (Soorty Enterprise) is one of the region's largest denim fabric
& garment exporters.
Abdullah Umer abdullah.umer@ismailiqbal.com Phone: (+92-21) 34302184, Ext: 406 3
Initial Public Offer - PABC
Ashmore’s exit: Reasonable exit considering the IRR June 11, 2021

Ashmore Investment background: Ashmore Investment Management Limited is a UK based

specialist Emerging Markets investment manager with over 25 years of experience in these
markets. The company has previous experience in establishing Aluminium cans manufacturing
plants in Nigeria, and Myanmar. As a part of its global screening exercise for screening
opportunities in can manufacturing space in the world, the company concluded that Pakistan &
Afghanistan soft drinks consumption is growing at a higher rate without any presence of a locally
cans manufacturing facility. To tap this lucrative opportunity, the project was planned to address
the genuine needs of the market both in Afghanistan & Pakistan. Through its associated company,
i.e. Ashmore Mauritius PABC Limited, the company set up Pakistan Aluminium Beverage Cans Private Equity Fund Investment
Limited in Dec-14. During the project construction phase in 2016, Pakistan’s Liberty group
invested in the company with an equity injection of PKR 2.5bn (i.e. 49% stake).
stages

Exit period is in-line with global private equity funds: The typical investment period for private
equity funds ranges between 7 to 10 years due to involvement in three stages. 1) Fundraising 2)
the investment period 3) the harvest period. 1st Stage: 2nd stage: 3rd Stage:
In the case of Pakistan, Ashmore Investment is exiting from its investment after seven years of
Fund
raising Investment Harvest
incorporating Pakistan Aluminium Beverage Cans in Pakistan. During the first stage of investment,
period period
Ashmore was involved in establishing and securing local investment from 2014-2016. After this stage
period, the fund injected its full equity of PKR 1,842mn (USD: 18mn) during CY2016. From then
onwards as PABC posted its first profit in CY18, fund harvesting period from the investment
started, which should be typically end between 2020-21.

We estimate USD based IRR of 18%/22% on floor/cap for Ashmore, which we think is a
reasonable return for an emerging market.
Abdullah Umer abdullah.umer@ismailiqbal.com Phone: (+92-21) 34302184, Ext: 406 4
Initial Public Offer - PABC
Upcoming expansion to cost mere USD8mn June 11, 2021

Upcoming expansion to cost only USD8mn: In consideration of the order book for CY21, the Capacity utilization to max out in CY21
company has decided to expand its current rated capacity from 750mn cans to 950mn annually by
incurring a nominal CAPEX of USD 8mn. This expansion is financed with SBP’s LTFF at 3% markup rate. 74%
In the future, the company can add another 250-300mn cans by incurring similar CAPEX. To note, the
plot size of the factory (i.e. 20.9acres) allows a maximum rated capacity of up to 2-2.4bn cans;
however, another line would have to be added for that. 70% 2018
2019
Further expansions cannot be ruled out: With the fifth largest population and the fourth highest rate 96%
2020
of urbanization in South Asia, PABC is well poised to benefit from the rising consumerism. Currently, 2021
Pakistan has the second largest young age population (0-14) in the world with an urbanization rate of 34%
37%. These two parameters of demographics have already propelled growth in soft drinks market in
Pakistan which has grown with a CAGR of 8% between 2014-2020 (Euromonitor report).

Population Age Mix (Top 10 countries)

Import substitution in Pakistan largely
2.7

4.3

5.2

6.0
6.1
6.4

7.4

11.5

8.8
9.3

15.1
16.2

17.1
completed
53.6

60.6

67.6

66.0
67.0

67.7

66.4

6,000 40%

67.3
5,084
69.7

4,809
70.7
66.8
65.2

65.0
5,000
30%
4,000
20%
3,000 2,057
43.7

2,000 10%
35.1

28.0
27.2

26.6

26.2

26.2

610
23.8
21.0

1,000
18.5

18.2

17.9
17.8

147 0%
-
CY18 CY19 CY20 -10%
Nigeria Pakistan Bangladesh India Indonesia Mexico Brazil United Russian China Weighted South Asia OECD (1,000)
States Federation Average members (799)
(Top 10) (2,000) -20%
0-14 15-64 65+
Source: World Bank, IIS Research Sales Net profit Gross margins-RHS

Abdullah Umer abdullah.umer@ismailiqbal.com Phone: (+92-21) 34302184, Ext: 406 5

Initial Public Offer - PABC
Environmental shift can lead to huge demand June 11, 2021

The global market for beverage packaging is estimated to be USD 115bn in the year 2020 and is Pakistan potential cans demand at diff
projected to reach USD 152bn by 2027, growing at a CAGR of 4%. Globally, Aluminium cans 1,000
penetration levels
comprise of USD 12.5bn market with an annual production of 174Bn units. By 2025, this market is 800
851

expected to grow at a CAGR of 4% to reach USD 17.2bn. Major drivers for growth in beverage 600 603
455
consumption include urbanization, growing disposable incomes, and altering lifestyle. Presently,
400 405
Aluminium cans packaging comprises 11% of total beverage packaging industry demand 394
200
worldwide, while PET bottling accounts for 40% of the total demand. 275
0
2021 2022 2023 2024 2025
Environmental concerns may alter the canvas of beverages packaging industry: In consideration
of rising environmental concerns in the developed countries, Aluminium cans demand is expected If penetration stays at current level If penetration increases by 50 bps

to increase drastically with the spillover effect to be witnessed in the emerging markets as well. It If penetration increases by 100 bps

has been estimated that Aluminium beverage cans comprise of almost 70% of recycled content
compared to 3% content of PET bottles. Recent commitments by Coca cola to have its packaging S.No Eco friendly commitments by companies globally
1 Pepsi Co has started to offer "Aquafina" in Aluminium cans in USA
material consist of 50% of recycled material by 2030 is expected to uplift Aluminium cans demand market.
further. Along with this, Pepsi Co has also announced plans to make 100% of its packaging 2 Pepsi Co to make 100% of its packaging recyclable by 2025
material recyclable by 2025. 3 Pepsi co has also announced to have only 25% of its packaging consist
of PET bottles by 2025
Potential increase of cans penetration in Pakistan: The study conducted by Bain & Co. showed 4 Coca cola to have bottles & cans with 50% recycled material by 2030.
that after establishment of indigenous cans manufacturing, cans penetration has witnessed a
significant increase. This increase resulted into a cans sales CAGR of 40%, 113% & 42% in Brazil,
Nigeria, and Russia, respectively. Though, our base case demand does not incorporate the case of
increasing penetration. We estimate that every 50 bps annual increase in cans penetration can
push Pakistan’s existing demand of 275mn cans to 603mn cans in CY2025 with a CAGR of 10%
(keeping beverage demand constant at CY21 levels).

Abdullah Umer abdullah.umer@ismailiqbal.com Phone: (+92-21) 34302184, Ext: 406 6

Initial Public Offer - PABC
Exports – Diversification to reduce reliance on Afghanistan June 11, 2021

Afghanistan market served as a key market for the Pakistan Aluminium Beverage Cans Limited as CY 20 Sales mix
sales to the country constitute 37% of the total company sales in CY20. In consideration of the
recent security situation in Afghanistan post US & Allied forces withdrawal, there is a potential
threat to exports. As per news flows, around ~150 Afghanistan soldiers have been killed in the Pakistan Afghanistan Pakistan Beverages
past few days as a result of an ongoing war with the Talibans in 26 out of the 34 provinces in the 13%
Coca Cola Beverages
9%
country. We believe that this situation calls for diversification into other markets, which the 9% Pakistan
Sukkur Beverages
company is already exploring.
19% Net Sales~PKR 5bn Others
21%
7%
Tapping other markets aggressively: PABC has recently started to supply cans to its new Afghanistan Beverages
Industry
customers i.e. American Canning (USA), Canadian Caning Inc. (USA) & Alika LLC (Tajikistan). 22%
Zalal Mowafiq
Presently, the company is negotiating trade terms and pricing with PepsiCo USA. Along with this,
the company is also exploring possibilities to cater to South Asian and Central Asian markets.
Exports to drive volumetric sales growth post
Along with this, PABC expects the next leg of growth to come from exports to Bangladesh, Central
expansion
Asian Countries, and Iraq. All these export destinations have a total market demand of ~1 billion
900
cans annually. In consideration of the competitive price of PABC cans with international quality
800
standards, PABC is likely to capitalize from the diversification of export markets.
700
600 446
425
PABC currently caters to 50% of the Afghan market: PABC has established relationships with all 500
375
325
major beverage bottlers in Pakistan & Afghanistan. These relationships are established through 400 303
long term contracts with dollar linked revenues. Due to these agreements in place, the company 300 188 171
manages to pass on cost impact to its customers. Exports to Afghanistan constitute a 37% share in 200 375 394
85 325 350
the total sales mix. Presently, the company holds 50% market share in Afghanistan while rest of 100 214 232 275
114
the market is being catered through imports from the Gulf Countries. In the next few years, PABC 0
is also targeting to increase its market share in Afghanistan to 60%. CY18 CY19 CY20 CY21E CY22E CY23E CY24E CY25E

Local sales Export sales Total

Abdullah Umer abdullah.umer@ismailiqbal.com Phone: (+92-21) 34302184, Ext: 406 Source: Company prospectus, IIS Research 7
Initial Public Offer - PABC
Valuation snapshot June 11, 2021

PABC is scaling and gaining efficiencies, the impact of which is visible in 4MCY21 earnings of PKR1.65/share. The margins have Valuation break up
also expanded to 34% vs 22%/30% in CY19/CY20. We believe that some of the margin expansion has come from better Floor price 35
inventory management and future margins might be on the lower side. Conservatively, we have assumed of 30-31% throughout Cap price 49
our valuation horizon vs 33-34% expected by the management. Based on these numbers, our CY21/CY22 EPS comes at Recommended subscription price 45
PKR3.7/PKR5.0, which implies a forward CY22F P/E of 7x on floor price. Intrinsic value - DCF based 58
Intrinsic value – P/E based (10x on CY22 EPS) 50
Blended Valuation 54
We have valued PABC on both DCF and P/E basis. For DCF, we have assumed cost of equity at 15%, while a terminal growth rate Upside from floor price 54%
of 5%. For P/E we have applied 10x multiple on CY22 earnings, where we believe higher growth prospects warrants above Upside from recommended subscription price 20%
market multiples.

Key risks to valuation: i) Demand slowdown from Afghanistan in case security tension escalates, ii) Lower than expected
demand from new export markets, iii) New entrant in Pakistan or Afghanistan, and iii) Lower than expected margins.

Valuation-FCFF CY22E CY23E CY24E CY25E CY26E CY22 earnings sensitivity to gross margins & exchange rate
Sum of discounted FCFF 7,566 1,053 1,520 1,629 1,706 1,659 Gross margins
PV of terminal value 17,896 4.98 28% 30% 32% 34%
1% 4.3 4.7 5.2 5.6

USD/PKR (%)
Less: Net Debt 4,545
2% 4.3 4.8 5.2 5.7
Equity value 20,916
3% 4.4 4.8 5.3 5.8
Per share 57.9
4% 4.5 4.9 5.4 5.8
Blended 53.9 5% 4.5 5.0 5.4 5.9
Upside from floor 54%
Upside from cap 10%
Upside from recommended subscription price 20%

Key valuation assumptions

Risk free rate 10%
Risk premium 5%
Cost of equity 15%
Terminal year growth 5%

Abdullah Umer abdullah.umer@ismailiqbal.com Phone: (+92-21) 34302184, Ext: 406 8

Initial Public Offer - PABC
Financial snapshot June 11, 2021

Income Statement CY18 CY19 CY20 CY21E CY22E CY23E CY24E CY25E
Net Revenue 2,057 4,809 5,084 7,321 8,534 9,869 11,299 12,346

Cost of Sales (2,276) (3,737) (3,542) (5,111) (5,926) (6,837) (7,802) (8,518)
Gross Profit (219) 1,072 1,542 2,209 2,608 3,033 3,497 3,828

General & Admin Expenses (291) (270) (246) (364) (284) (302) (321) (341)

Other Expenses - (20) (168) (103) (136) (166) (200) (227)

Operating Profit (510) 782 1,104 1,742 2,189 2,565 2,976 3,260
Depreciation and Amortization (232) (244) (235) (208) (238) (256) (261) (265)

Other Income 6 60 17 19 19 31 74 144

Finance Costs (475) (578) (423) (285) (270) (232) (195) (158)

EBT (979) 264 698 1,477 1,939 2,365 2,855 3,246

Net Income (799) 146 611 1,333 1,800 2,248 2,739 3,130

EPS (2.2) 0.4 1.7 3.7 5.0 6.2 7.6 8.7

DPS - - - - - 3.0 4.0 4.5

Balance Sheet CY18 CY19 CY20 CY21E CY22E CY23E CY24E CY25E
Non-Current Assets 6,508 6,333 6,092 6,799 7,063 6,937 6,810 6,682

Current Assets 1,539 2,612 2,713 3,561 4,071 4,860 6,171 7,474

Total Assets 8,047 8,945 8,805 10,360 11,134 11,797 12,981 14,156

Total Equity 1,718 2,533 3,144 4,477 6,277 7,442 9,098 10,783

Long-Term Liabilities 389 3,291 3,363 3,774 3,663 3,098 2,522 1,935

Current Liabilities 5,940 3,121 2,298 2,108 1,194 1,256 1,360 1,438

Total Equity & Liabilities 8,047 8,945 8,805 10,359 11,134 11,797 12,980 14,156

Source: Company prospectus, IIS Research

Abdullah Umer abdullah.umer@ismailiqbal.com Phone: (+92-21) 34302184, Ext: 406 9

Initial Public Offer - PABC
Financial snapshot June 11, 2021

Ratio Analysis CY18 CY19 CY20 CY21E CY22E CY23E CY24E CY25E
Margins
Gross Margin -10.7% 22.3% 30.3% 30.2% 30.6% 30.7% 30.9% 31.0%
Operating Profit Margin -24.8% 16.3% 21.7% 23.8% 25.7% 26.0% 26.3% 26.4%
EBITDA Margin -13.2% 22.6% 26.7% 26.9% 28.7% 28.9% 29.3% 29.7%
Net Income Margin -38.8% 3.0% 12.0% 18.2% 21.1% 22.8% 24.2% 25.4%
Solvency Ratios
Debt to Equity Ratio 333.3% 218.8% 146.1% 104.8% 55.9% 38.6% 24.9% 15.4%
Debt to Capital Employed Ratio 76.9% 68.6% 59.4% 51.2% 35.9% 27.9% 20.0% 13.4%
Profitability Ratios
Return on Assets -10.4% 1.7% 6.9% 13.9% 16.7% 19.6% 22.1% 23.1%

Return on Equity -37.7% 6.9% 21.5% 35.0% 33.5% 32.8% 33.1% 31.5%
Growth
Gross Revenue Growth 12365.7% 132.3% 6.5% 41.9% 17.0% 15.3% 14.2% 9.3%
Net Revenue Growth 13102.9% 133.8% 5.7% 44.0% 16.6% 15.6% 14.5% 9.3%

Operating Profit Growth 19.3% -253.3% 41.2% 57.8% 25.6% 17.2% 16.0% 9.5%

EBITDA Growth -13.6% -498.9% 24.9% 45.3% 24.2% 16.6% 16.1% 10.8%
EBT Growth 95.0% -126.9% 164.7% 111.6% 31.3% 22.0% 20.7% 13.7%
Net Income Growth -26.7% -118.2% 319.2% 118.3% 35.0% 24.9% 21.8% 14.3%

Source: Company prospectus, IIS Research

Abdullah Umer abdullah.umer@ismailiqbal.com Phone: (+92-21) 34302184, Ext: 406 10

Initial Public Offer - PABC
June 11, 2021

Industry Overview

Abdullah Umer abdullah.umer@ismailiqbal.com Phone: (+92-21) 34302184, Ext: 406 11

Initial Public Offer - PABC
Global Soft Drinks Market June 11, 2021

The global soft drinks market is estimated to at USD 771bn in 2020 which is likely to grow
with a CAGR of 3.7% to reach USD 838bn according to Euromonitor research. Bottled water
and Carbonated drinks segments dominate the market with 50% & 29% shares,
respectively.

Globally, soft drinks market remains very fragmented with top five companies holding ~
37% market share. Presently, Coca Cola holds the highest market share of 21% followed by
Pepsi Co share of 10%.

Top 5 Global Players market shares

Keurig Dr Pepper Inc. 2%

Global market segmentation - Product wise

Nestle SA 2%
5%
6%

Suntory Holdings Ltd 2% 10%

Bottled water
Carbonated drinks
Pepsi Co 10% Juices 50%
RTD Tea
Coca-Cola 21% Others
29%

0% 5% 10% 15% 20% 25%

Abdullah Umer abdullah.umer@ismailiqbal.com Phone: (+92-21) 34302184, Ext: 406 12

Initial Public Offer - PABC
Pakistan Soft Drinks Market June 11, 2021

Pakistan soft drinks market is estimated at 3,852mn liters in 2020. In the carbonated drinks Pakistan soft drinks market- Mn litres
segment, two large companies hold ~82% market share in the country. 4,500
4,000 3,763 3,852
Segment wise break up of Pakistan soft drinks almost follow the global trend with bottled water 3,482
3,500 3,214
constituting majority of (i.e. 42%) of the share, followed by the 39% share of the carbonated 3,000 2,722
2,957

drinks. 2,500
2,000
In the carbonated drinks segment, Coca-Cola holds 42% market share in the Pakistan followed by 1,500
the 40% market share of the Pepsi Co. 1,000
500
In anticipation of growing demand, Coca-Cola and Pepsi Co have invested significantly in Pakistan
0
market. Just in the last few years, Coca-Cola has invested ~USD 600mn in the country. Along with CY15 CY16 CY17 CY18 CY19 CY20
this, both of these companies plan to invest USD 1.4bn in the upcoming years.

Major market players in Pakistan market shares Pakistan soft drinks market break up –segment wise

16% 3%
16%
Coca Cola 2% Bottled water
42% 42%
Pepsi Co Carbonates
Gourmet Juices
Others Others

39%
40%

Abdullah Umer abdullah.umer@ismailiqbal.com Phone: (+92-21) 34302184, Ext: 406 13

Initial Public Offer - PABC
Company Background June 11, 2021

Pakistan Aluminium Beverage Cans Limited started its commercial operations in Sep-17 as Production capacity- Mn no CY18 CY19 CY20
country’s sole manufacturer of Aluminium beverage cans. The company's manufacturing facility is Rated capacity 700 700 700
situated in a Special Economic Zone (SEZ) established in the M3 Industrial City, Faisalabad. The Effective capacity 600 600 600
company factory location is situated in proximity to major bottlers & beverages companies near Actual production 238 419 444
Faisalabad i.e. Coca Cola & PepsiCo Pakistan. Along with this, the company also enjoys a 10-year Effective capacity Utilization 40% 70% 74%
tax holiday under SEZ act which started in 2017. Source: Company prospectus, IIS Research

Product Portfolio: Presently, PABC manufactures Aluminium beverage cans in two sizes, i.e. 250 &
300ml. Approximately 75% of the company’s sales comprised of 250ml cans due to its widespread
popularity in Pakistan and Afghanistan. Along with this, PABC has recently invested in its ability to
produce 330ml & 355ml size cans. These newly introduced can sizes are in line with the standard
can sizes available for Coca-Cola & PepsiCo in the USA.

Robust pricing power: Raw material accounted for 82% of COGS in CY20, wherein Aluminium Industry duty 300ml
structure Finished Cans Layer Pads Chemicals
coils and can-ends accounted for 60 & 30% of the material costs. Both of these raw material Customs duty 20% 20% 20%
prices are indexed to London Metal Exchange Aluminium prices, and any price fluctuations are Add. Customs duty 7% 7% 7%
passed on to the customers. During CY20, the company recorded 30% gross margins due to a fall Add. Sales tax 3% - -
in Aluminium prices. This shows the company’s ability to benefit from the decrease in raw Regulatory duty 10% - 5%
Source: Company prospectus, IIS Research
material prices while hedging itself in the wake of any increase in prices.

Capacity utilization: In a short span of time, company has achieved 74% capacity utilization in
CY20 which could have been on higher side as Covid-19 induced nationwide lockdown in Mar-20
has halted company’s production during lockdown period.

Abdullah Umer abdullah.umer@ismailiqbal.com Phone: (+92-21) 34302184, Ext: 406 14

Initial Public Offer - PABC
Production process: June 11, 2021

Body-makers &
Cup press Washing operation
Trimming

Necking flanging &

External decorations Internal coating Inspection

Palletizing Warehousing & Filling Purchase & Recycling

Abdullah Umer abdullah.umer@ismailiqbal.com Phone: (+92-21) 34302184, Ext: 406 15

Initial Public Offer - PABC REP-092

June 11, 2021

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Monetary compensation of research analysts is neither determined nor based on any other service(s) that IISPL offers, and the compensatory evaluation is not
influenced nor controlled by anyone belonging to a non-research department. Further, the research analysts are headed by the Head of Research, who reports
Recommendations are based on the following conditions:
Rating criteria Stance
(Target Price/Current Price - 1) > 10% Positive
(Target Price/Current Price - 1) < -10% Negative
9% > (Target Price/Current Price -1) > -9% Neutral
Investors should carefully read the definitions of all rating used within every research report. In addition, research reports carry an analyst’s independent view and
investors should ensure careful reading of the entire research reports and not infer its contents from the rating ascribed by the analyst. Ratings should not be used or
relied upon as investment advice. An investor’s decision to buy, hold or sell a stock should depend on said individual’s circumstances and other considerations.
Valuation Methodology
To arrive at our period end target prices, IISPL uses different valuation methadologies including
Discounted cash flow (DCF, DDM)
Relative Valuation (P/E, P/B, P/S etc.)
Equity & Asset return based methodologies (EVA, Residual Income etc.)
Analyst Disclaimer
The author(s) of this report hereby certifiies that this report accurately reflects her/his/their own independent opinions and views as of the time this report went
into publication and that no part of her/his/their compensation was, is or will be affected by the recommendation(s) in this report.
The research analyst or any of her/his/their close relatives do not have a financial interest in the securities of the subject company aggregating more than 1% of the
value of the company and the research analyst or their close relatives have neither served as a director/officer in the past 3 years nor received any compensation
from the subject company in the past 12 months. The Research analyst or her/his/their close relatives have not traded in the subject security in the past 7 days and
will not trade for 5 days post publication of the report.

Abdullah Umer abdullah.umer@ismailiqbal.com Phone: (+92-21) 34302184, Ext: 406 16

Initial Public Offer - PABC REP-092

June 11, 2021

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