Karachi Stock Exchange Weekly Analysis 1 February, 2015

The Karachi Stock Exchange (KSE) market continued its rally. KSE-100 index closed on 34,444 by gaining 417 points or 1.23% while KSE-30 index closed on 22,292 by gaining 188 points or 0.85%. With the 100 bps cut in DR, trading activity remained robust however in later week due to deteriorating law and order in the city, average trading volumes declined by 1.3 percent WoW to 298 million shares per day while net foreign buying clocked in at $3.3 million versus last week’s net buying of $1.7 million.

Monthly Consumer Price Index (CPI) inflation numbers for January 2014, which are expected to be announced on Monday, would likely guide the index in the coming week, while investors were also expected to keenly watch out for foreign flows. Oil prices are likely to be reduced from the onset of month which may dampen the inflation expectation going forward. The investors are up for a ride backed by discount rate cut and lower cost of fuel and energy.

According to experts of http://www.karachistockexchange.org, following news have played vital role in Karachi Stock Market index movement:

  • Over the weekend announcement of discount rate cut by 100bps fueled the bull with endless energy. Post DR cut the banking sector witnessed a lackluster interest where investors feel the banking spreads may dent the earnings
  • The result season was kicked‐off on a pessimistic note where E&P companies declared lower earnings on account of crude oil prices
  • PPL, POL and OGDC felt the heat of lower earnings as stock fell down by 3% ‐ 4% followed by ATRL
  • Rest of the stocks including FFC, FFBL, MLCF and HCAR results were in line with analyst anticipation
  • Cement stocks were in a rock & roll mood with CHCC, MLCF, PIOC and KOHC posting greater return on the back of lower cost of fund and fuel prices to push the overall profitability in the upcoming quarters
  • With the start of the new month, PBS is scheduled to declare the inflation numbers which are likely to be lower in the range of 3.94% ‐ 3.98% taking YTD inflation lower to 5.7%‐5.78%. Furthermore oil prices are likely to be reduced from the onset of the month which may dampen the inflation expectation going forward
  • Pakistan is likely to strike a long‐term LNG supply contract with Qatar at an estimated price based on current commodity rates in international market in the range of USD8 to USD10/mmbtu
  • ECC of the Cabinet has approved a subsidy of PKR6bn for the export of 1.2mn tons of surplus wheat available with Punjab and Sindh governments
  • Pakistan Steel to break even by April. With half of the PKR18.5bn bailout package consumed in salaries, the PSM has sought another PKR4.5bn to pay gratuity to its retired employees. This is the crux what PSM MD retired the sub‐committee of the Public Accounts Committee which interestingly endorsed the spending on salaries of the employees. He conceded that the capacity utilization of PSM stood at 30% against 77% committed to avail Rs18.5bn bailout package last year. He claimed that the PSM would reach the breakeven by April as its production is expected to reach 77% of its production capacity
  • Government of Pakistan is to release PKR40bn to PSO for opening a LC to import FO and other petroleum products, MoP that within next 1‐week four ships carrying FO will dock at Karachi Port
  • KEL signed an agreement with Chinese companies to set up 700MW of coal‐fired power plants by 2018, a move that will minimize the utility’s reliance on the electricity supply from the national grid
  • Governor State Bank has urged the country´s Islamic banks to develop ways to reward their customers in line with a surge in the sector´s profitability, or face regulatory action
  • SBP governor stated that the central bank may take regulatory measures to lower the banking industry’s spread, after reviewing the position in Jun’15
  • Tensions in Karachi after the killing of a member of a leading political party resulted in the index receding on Wednesday and ending the week on a dull note on Friday
  • The highly leveraged cement sector and Engro Corporation were the main beneficiaries of the discount rate cut and were the primary driving force behind the market’s gains for the week
  • The cement sector was the star performer of the week owing to the rate cut. Maple Leaf Cement, DG Khan Cement and Lucky Cement led the way, climbing 9.5%, 7.6% and 3.7% respectively. The sector overall contributed 189 points to the index’s gains for the week
  • Foreigners continued to be net buyers, but barely so as they bought a net of $3.3 million worth of equity during the week, up slightly from $1.7 million in the previous week

Top gainers of last week were: Arif Habib Corp, Kohinoor Textile, Cherat Cement, Packages Limited, Kohat Cement, Maple Leaf Cem., EFU Life Assur Ltd., Pioneer Cement, Abbott Lab and Engro Foods Ltd.

Top losers of last week were: J.D.W.Sugar, Shezan International Ltd., Attock Refinery Ltd., Lotte Chemical Pakistan Ltd, Attock Petroleum, Pace (Pak) Ltd., Pakistan Cables, Meezan Bank, Bata (Pak) Ltd. and K‐Electric.

Top ten volume leaders: KEL, MLCF, BOP, LOTCHEM, ENGRO, JSCL, NBP, EFOODS, CHCC, DGKC and FFBL.

Following are few BUY recommendations:

Oil & Gas Development Co. (OGDC) – BUY
Current Price: PKR 210.94
Target Price: PKR 282

Pak Oilfields (POL) – BUY
Current Price: PKR 366.03
Target Price: PKR 448.00

Pakistan Petroleum (PPL) – BUY
Current Price: PKR 170.48
Target Price: PKR 221

Allied Bank Limited (ABL) – BUY
Current Price: PKR 114.37
Target Price: PKR 140.0 

Habib Bank Limited (HBL) – BUY
Current Price: PKR 210.47
Target Price: PKR 262.00

Bank Al-Falah (BAFL) – BUY
Current Price: PKR 33.75
Target Price: PKR 39

Maple Leaf Cement (MLCF) - BUY
Current Price: PKR 52.61
Target Price: PKR 58.00

Pak Suzuki (PSMC) - BUY
Current Price: PKR 429.27
Target Price: PKR 495.00

Engro Polymer Chemicals (EPCL) - BUY
Current Price: PKR 13.1
Target Price: PKR 16.5

Nishat Mills (NML) - BUY
Current Price: PKR 130.7
Target Price: PKR 163.5

Attock Cement Ltd. (ACPL) - BUY
Current Price: PKR 214.59
Target Price: PKR 262.6

D.G. Khan Cement Co. (DGKC) - BUY
Current Price: PKR 131.31
Target Price: PKR 149.4

Kohat Cement Company (KOHC) - BUY
Current Price: PKR 212.10
Target Price: PKR 223.1

Following are few SELL recommendations:

Engro Corporation (ENGRO) – SELL
Current Price: PKR 297.37
Target Price: PKR 245.00

Hub Power Co (HUBCO) – SELL
Current Price: PKR 84.14
Target Price: PKR 71.00

Kot Addu Power Co (KAPCO) – SELL
Current Price: PKR 82.00
Target Price: PKR 65.00

Pakgen Power Ltd. (PKGP) – SELL
Current Price: PKR 34.38
Target Price: PKR 24.00

National Bank (NBP) – SELL
Current Price: PKR 70.07
Target Price: PKR 53.00

Dawood Hercules Limited (DAWH) – SELL
Current Price: PKR 116.5
Target Price: PKR 71.8

Thank you very much for reading this article.

NOTE: The information posted in this blog /forum (http://www.karachistockexchange.org/) is based on current affairs & investors point of view. There may be discrepancy in the ground realities.

Written by: Rana Khurram

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