AHLPakistanStrategy2025_Conqueringnewheights

Pakistan Strategy 2025
Conquering new heights

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Pakistan Investment Strategy
2025
Pakistan Investment Strategy 2025

KSE 100 Index Target
Conquering new heights
Estimates 2025
Synopsis: We expect KSE-100 index to reach 120,010 points by Dec'25, indicating a
27% upside from current levels. We view that the stage is set for a potential market
rerating with declining interest rates, a stable PKR, and improving macroeconomic Valuation Basis
indicators. Domestic liquidity is on the upswing, driven by fresh domestic inflows
alongside conversions from fixed income. Pakistan is increasingly attracting the Target Justified
attention of foreign investors, particularly in its debt and equity markets. The Price PE
momentum for mergers and acquisitions along with expected FDI is also boosting
investor sentiment.
Improving macros: We maintain an optimistic outlook for FY25, supported by Weight

conducive domestic macro factors.
▪ GDP growth is expected at 2.4% during FY25. 50% 50%
▪ The Current Account deficit is expected to be manageable (FY25e: -0.3% of
GDP).
▪ Downward trajectory for inflation, we estimate FY25 and FY26 inflation to clock Index
in at 7.5% and 9.9%.
▪ Continuation of monetary policy easing, bringing the policy rate down to 12% by 119,459 120,561
Jun’25 end.
▪ Improved external flows to keep PKR stable.
Valuations are still compelling: Even with a 50.8% return during CY24TD, the Target 2025 Current Index
KSE100 index remains undervalued across various valuation perspectives. 120,010 94,192
▪ On P/E basis, the KSE100 index is trading at 5.3x; 36.1% discount to last 10-year
average of 8.3x.
▪ The KSE-100 Index is trading at market cap to GDP of 11.1%, a discount of 34.3% Expected Return 2025
compared to last 10-year average. 27.4%
Sectoral views:
▪ Banks: Subdued interest rates to suppress earnings, but banks to focus on
volumetric growth to ensure profitability.
▪ E&P: Earnings to remain broadly unchanged, higher payouts and circular debt
resolution will keep the sector in limelight.
▪ Fertilizer: Stable urea and higher DAP offtake alongside margins to propel
earning growth of 11.4%.
▪ Cement: Margins to remain elevated due to better power mix and low coal prices
leading to 32.1% earnings growth.
▪ OMCs: The sector is expected to witnessed 39.1% earnings growth amid
reduction in inventory losses, alongside improved OMC margins.
▪ Textile: Global recovery to drive demand, however higher taxes to hurt
profitability.
▪ Technology: Earnings growth of 39.3% is driven by a stable demand
environment, innovation, and increasing adoption of digital solutions.
▪ Autos: Demand to recover following economic stability and lower interest rates,
with EVs to gain prominence.
Top picks: OGDC, PPL, PSO, NBP, FABL, UBL, FFC, LUCK, FCCL, MLCF, INDU,
HUMNL, AIRLINK, SYS and HTL.
Closing as of 14-Nov-2024
Arif Habib Limited 2

2025
Table of Contents
Pakistan Investment Strategy 2025: Synopsis 2

AHL Portfolio: Outperforms, yet again! 4
Pakistan at a Glance 7
Politics: Stability is crucial 8
Economy: From challenges to changes 11
• Economic outlook 12
• Aiming for fiscal consolidation 13
• Structural reforms - Strategic necessities 16
• Trade dynamics and deficits 18
• Revitalizing Pakistan’s economy with IMF support 22
• Stable PKR- The impact of strengthened reserves 25
• Rate cuts loom as inflation eases 27
• Emerging signs of modest growth 29
• Key Economic Indicators 32
Capital Market: Thrills and gains 33
Sector-wise top picks 47
• Banks 48
• Exploration & production 55
• Fertilizer 65
• Cements 71
• Power generation and distribution 80
• Technology & communication 87
• Oil & gas marketing companies 94
• Automobile assemblers 99
• Textile composite 104
Alpha stocks 108
Recommendation summary 114
List of abbreviation 115
Contact list 116

2025
AHL Portfolio
Outperforms, yet again!

2025
AHL Model Portfolio shines once again

Since Jan’23, we have introduced the AHL Model Portfolio to assess the performance
of our recommended stocks relative to the market. The portfolio undergoes semi-
annual rebalancing, aligned with our calendar and fiscal year strategy reports, to
ensure it remains reflective of our latest market insights and recommendations.
AHL Model portfolio has been consistently outperforming all the benchmark indices
since inception. The portfolio has outperformed the benchmark KSE-30, KMI-30 and
KSE-100 indices by 107.9%, 92.9% and 70.5% respectively since inception. From the
last rebalancing (Jul’24), AHL model portfolio outperformed KSE-30, KMI-30 and
KSE-100 indices by 18.0%, 19.9% and 13.5%, respectively.
For CY25 we are rebalancing our model portfolio. We have closed our position in
MARI (previously 5.0%) and HUBC (previously 5.0%) and added PSO, HUMNL,
AIRLINK and HTL with a weight of 10.0%, 5.0%, 2.5% and 2.5% respectively. We
have increased FFC weight to 7.5% (previously 5.0%) while reducing UBL, MEBL,
MLCF and LUCK weight to 5.0%, 7.5%, 7.5% and 5.0% respectively (previously 7.5%,
10.0%, 10.0% and 10.0%). Due to recent developments in the banking sector,
specifically the imposition of MDR requirements on Islamic banks, we have closed our
position in MEBL.
Exhibit: Proforma AHL Model Portfolio
Company Model Portfolio Weight

Benchmark 1-year forward 1-year forward 1-year forward
Revised Revised Index weight PE (x) PB (x) DY (%)
Previous
(16-Nov-24) (27-Nov-24)
Unchanged positions
OGDC 10.0% 10.0% 10.0% 4.35% 4.05 0.58 12.52
PPL 10.0% 10.0% 10.0% 3.52% 3.62 0.54 10.45
FCCL 10.0% 10.0% 10.0% 0.96% 5.15 0.86 6.10
NBP* 7.5% 7.5% 7.5% 1.08% 3.25 0.31 14.93
INDU 5.0% 5.0% 5.0% 0.96% 7.09 1.89 8.44
FFBL 5.0% 5.0% 5.0% 1.00% Estimates incorporated in FFC due to merger
New additions
PSO 0.0% 10.0% 10.0% 1.81% 3.24 0.45 5.64
HUMNL 0.0% 5.0% 5.0% n.a 5.79 1.40 3.32
AIRLINK 0.0% 2.5% 2.5% 0.44% 7.65 2.25 5.79
HTL 0.0% 2.5% 2.5% n.a 4.86 0.82 9.08
Closed positions
MARI 5.0% 0.0% 0.0% 3.81% 7.07 1.66 5.71
HUBC* 5.0% 0.0% 0.0% 3.73% 3.19 0.48 9.95
MEBL* 10.0% 7.5% 0.0% 3.51% 5.42 1.60 10.21
Change in weights
FFC 5.0% 7.5% 7.5% 6.73% 5.49 4.55 15.35
UBL* 7.5% 5.0% 5.0% 5.47% 6.77 1.37 13.18
MLCF 10.0% 7.5% 7.5% 0.66% 4.77 0.59 7.54
LUCK* 10.0% 5.0% 5.0% 3.16% 6.04 0.79 3.33
Source (s): AHL Research, *Consolidated, ^model portfolio reflects the analysis and consensus views of research and trading desks.

2025
Figure: AHL model portfolio performance (since inception) Figure: AHL model portfolio performance (Jun-2024)
AHL Model Portfolio KSE100 KSE30 KMI30 AHL Model Portfolio KSE100
KSE30 KMI30
330% 139.00%
300% 132.00%
270%
125.00%
240%
118.00%
210%
111.00%
180%
150% 104.00%
120% 97.00%
90%
90.00%
Dec-22
Jun-23
Dec-23
Jun-24
Apr-23
Aug-23
Oct-23
Apr-24
Aug-24
Oct-24
Feb-23
Feb-24
Jul-24
Jul-24
Jul-24
Jul-24
Jun-24
Aug-24
Aug-24
Aug-24
Aug-24
Aug-24
Sep-24
Sep-24
Sep-24
Sep-24
Nov-24
Nov-24
Oct-24
Oct-24
Oct-24
Oct-24
Source (s): Bloomberg, PSX, AHL Research Source (s): Bloomberg, PSX, AHL Research

2025
Pakistan at a glance
Exhibit: Pakistan at a Glance
Economy Equities
Population (mn) 241 Major Stock Exchange Pakistan Stock Exchange
Lower Middle-Income Class (of population) 40.5% Benchmark Index KSE100 Index
Per Capita Income (USD, FY24) 1,673 Total Market Cap (USD bn, Nov'24) 43.8
GDP size (USD bn, FY24) 374 Free Float Market Cap (USD bn, Nov'24) 12.1
GDP Growth (FY24) 2.52% Market Cap as % of GDP 11.1%
Sovereign Rating Fitch: CCC+, Moody's: Caa2 Avg. Daily Traded Value (USD mn, CY24TD) 67.1
SBP Reserves (USD bn, Nov'24) 11.3 Avg. Daily Traded Volume (mn shr. CY24TD) 480.0
Current Account Balance (USD mn, 1QFY25) (98) MSCI Category Frontier Markets
Fiscal Deficit (PKR bn, FY24) 7,207 Number of Stocks in MSCI FM 21
CPI Inflation (10MCY24 Avg.) 14.80% Largest Sector Banks
Policy Rate (Nov'24) 15.00% Largest Stock OGDC
Domestic Debt as % of GDP (FY24) 44.6% Net Foreign Flows (USD mn, CY24TD) (35.7)
External Debt as % of GDP (FY24) 23.1%
Total Debt as % of GDP (FY24) 67.7%
Source (s): PSX, SBP, MSCI, PBS, NCCPL, AHL Research

2025
Politics
Stability is crucial

2025
Upholding reforms amidst political challenges

Elections that took place in Feb’24 and the formation of an elected government were
crucial for sustaining the economic reforms initiated under the caretaker
administration. This transition served as a significant catalyst for the bull run in the
equity market during the outgoing FY24. The markets responded positively, driven by
investor optimism that these reforms would continue and further stabilize the
economy.
PSX has demonstrated remarkable resilience in CY24TD, buoyed by improving

macroeconomic indicators and robust fundamentals. Investors are increasingly
optimistic, anticipating that the new government will effectively manage the challenges
ahead and capitalize on the groundwork laid by the caretaker administration, as well
as the commitments made under the newly signed 37-month Extended Fund Facility
(EFF) with the International Monetary Fund (IMF). The EFF represents a crucial lifeline
for Pakistan, providing not only financial support but also a framework for necessary
economic reforms.
The current environment suggests that the PSX is on the brink of a fresh era
characterized by long-awaited re-rating and value realization, offering promising
opportunities for investors. As the government seeks to reassure both local and
international stakeholders, maintaining a stable political environment will be essential
for fostering continued investment and economic growth.
Going forward, we remain optimistic that the incumbent government will remain
committed to the IMF and fulfill the benchmarks laid out under the EFF to ensure that
Pakistan achieves sustainable economic growth. Adhering to these benchmarks is
vital not only for restoring investor confidence but also for stabilizing the
macroeconomic environment. By meeting the stipulated requirements, the
government can pave the way for structural reforms that enhance fiscal discipline,
bolster external reserves, and create a more conducive environment for both domestic
and foreign investments.
Such measures will be instrumental in addressing the economic challenges and

accelerating our path toward growth. Key areas of focus should include improving tax
collection mechanisms, rationalizing subsidies, and implementing transparent
governance practices. By prioritizing these structural reforms, the government can
effectively reduce fiscal deficits and create a stable economic framework that
encourages investment. Furthermore, enhancing the regulatory environment will be
critical for attracting FDI. If the government effectively manages the current situation,
it will enhance the economy and build a solid foundation for long-term prosperity in
Pakistan.

2025
Economy pre & post elections
Figure: Average CPI and policy rate Figure: SBP reserves and PKR/USD
Average CPI Policy Rate (Period End) SBP Reserves Average PKR/USD (RHS)
(USD bn)
40% 12.00 310
35%
10.00 300
30%
8.00 290
25%
20% 6.00 280
15%
4.00 270
10%
2.00 260
5%
0% - 250
Jul-23
Jul-24
Jun-23
Aug-23
Sep-23
Nov-23
Dec-23
Jan-24
Jun-24
Aug-24
Sep-24
Mar-23
Apr-23
Oct-23
Mar-24
Apr-24
Oct-24
Nov-24*
Feb-23
May-23
Feb-24
May-24
Jul-23
Jul-24
Jun-23
Feb-23
Nov-23
Dec-23
Jan-24
Jun-24
Nov-24
Apr-23
Aug-23
Sep-23
Oct-23
Apr-24
Aug-24
Sep-24
Oct-24
Mar-23
May-23
Feb-24
Mar-24
May-24
Source (s): PBS, SBP, AHL Research Source (s): SBP, AHL Research, *as of 1st Nov
Figure: Trend of consumer confidence index Figure: Trend of business confidence index
Next six months CCI
Next six months BCI
51.00 62.00
48.00 56.00
45.00 50.00
42.00 44.00
39.00 38.00
36.00 32.00
33.00 26.00
30.00 20.00
Jul-23
Jul-24
Jun-23
Nov-23
Dec-23
Jan-24
Jun-24
Apr-23
Aug-23
Sep-23
Oct-23
Apr-24
Aug-24
Sep-24
Oct-24
Feb-23
Mar-23
May-23
Feb-24
Mar-24
May-24
Jul-24
Jul-23
Jun-24
Jun-23
Nov-23
Dec-23
Jan-24
Apr-23
Aug-23
Sep-23
Oct-23
Apr-24
Feb-23
Mar-23
May-23
Feb-24
Mar-24
May-24
Aug-24
Sep-24
Oct-24
Source (s): SBP, AHL Research Source (s): SBP, AHL Research

2025
Economy
From challenges to changes

2025
▪ Focus on fiscal consolidation

▪ Fiscal deficit could potentially decrease to 4.9% of GDP in
FY25e.
▪ Gov’t’s fiscal plan includes revenue-enhancing and
Aiming for fiscal consolidation expenditure-controlling measures.
▪ Pakistan plans to privatize 24 state-owned enterprises

from 2024 to 2029 to alleviate fiscal burdens.
▪ All SOEs are to be integrated into a new legal framework
Structural reforms - Strategic by Jun’25, and the Sovereign Wealth Fund Act will be
necessities revised by Dec’24.
▪ CAD for FY25e: USD 1.0bn (-0.3% of GDP).

▪ Trade deficit for FY25 expected around USD
30bn, driven by a 10% YoY increase in imports
Trade dynamics and deficit
and a 3% growth in exports.
▪ Remittances FY25e: +15% YoY to USD 34.7bn
▪ Pakistan has secured an EFF facility from the

Economic IMF, valued at USD 7bn.
Revitalizing Pakistan’s
Outlook economy with IMF support ▪ For FY25, the financing plan includes USD
16.4bn in rollovers.
▪ Pakistan eyeing another short-term IMF
facility of USD 1bn under RSF.
▪ SBP is expected to end FY25 with reserves

Stable PKR- The impact of around USD 13.0bn.
strengthened reserves ▪ With strengthened reserves, supported by
the IMF program and the removal of
multiple currency practices; we expect
PKR/USD will be around 280 by Dec’24 and
288.4 by Jun’25.
Further rate cuts loom as
inflation eases
▪ Inflation average of 7.5% expected in FY25.
▪ Combined efforts of stringent monetary and
fiscal measures have led to a sustained
Emerging signs of modest growth reduction in inflationary pressures.
▪ Substantial further cuts are anticipated by the
end of FY25, potentially to 12%.
▪ GDPg in FY25 is projected at 2.4%.▪
▪ Growth rebound to 4.7% in FY26 expected.
▪ Agri- sector est. to grow at 0.4% in FY25.
▪ Industry is expected to grow by 2.6%.
▪ Services are projected to grow by 3.2%.

2025
Aiming for fiscal consolidation

Pakistan is charting a bold course towards fiscal resilience in FY25, with the IMF
▪ Focus on fiscal consolidation
spotlighting a leaner, more disciplined approach to economic management. Last year’s
▪ If reforms are effectively implemented, the
historic primary surplus of PKR 953bn (0.9% of GDP) set the tone, and the government deficit could potentially decrease to 4.9% of
now targets a robust 2% surplus, reaffirming its commitment to fiscal stability. This GDP in FY25e.
quarter marks Pakistan’s first budget surplus since 2QFY04, powered by an ▪ Gov’t’s fiscal plan includes revenue-enhancing
and expenditure-controlling measures.
extraordinary PKR 2.5trn profit from the SBP and resulting in a record-high primary
surplus of PKR 3trn. In line with IMF recommendations, Pakistan seems to be focused
on curbing high expenditure on pensions, infrastructure, and subsidies to reduce debt
and sustain deficit control. With a projected deficit of 5.9% (our expectation is 4.9%) of
GDP this year, down from 6.8% in FY24, the country’s fiscal roadmap reflects a clear
commitment to reform.
Path to consolidation: The fiscal outlook for Pakistan in FY25e reflects an ambitious,
yet achievable, path toward fiscal consolidation, building on the progress made in FY24.
For FY25b, the government has laid out a fiscal adjustment plan aimed at reducing the
overall fiscal deficit from 6.8% of GDP in FY24 to 5.9% (our expectation is 4.9%). This
plan includes both revenue-enhancing and expenditure-controlling measures. The
government projects gross revenue at 14.3% of GDP and total spending at 15.2% of
GDP. While these targets are ambitious, there is potential for the deficit to be reduced
even further, potentially down to 4.9% of GDP (we view), if reforms are successfully
implemented. Key to achieving this will be the government’s commitment to improving
tax collection through direct and indirect taxes, including bringing the retail, export, and
agricultural sectors fully into the tax net and curtailing markup expense.
Figure: Fiscal Deficit (% of GDP)
9.0%
7.9% 7.8%
8.0%
7.1%
6.8%
7.0%
6.1%
6.0% 5.5%
4.9%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
FY20 FY21 FY22 FY23 FY24 FY25e FY26f
Source (s): MoF, AHL Research
Revenue assumption remains aggressive: On the revenue front, the FBR target of
PKR 12.9trn set for FY25 faces significant challenges as economic conditions and tax
collection trends reveal potential shortfalls. With roughly 40% of FBR’s revenue
historically dependent on import taxes, the high tariffs and restrictions on non-essential
imports, combined with PKR stability, mean customs duties and import sales tax
collections may struggle to meet their targets. Although the FBR projects additional
revenue from GDP and LSM growth, inflation, and recent tax measures, the first four
months already missed its target by ~ PKR 190bn. Achieving FY25’s 40% YoY revenue
growth increase will hinge on robust enforcement and favorable economic shifts.
Moreover, the authorities aim to generate significant non-tax revenue, with the SBP alone
contributing PKR 2.5trn in profits. This revenue boost, alongside targeted tax policy
reforms, will be essential for meeting fiscal targets. As per the Budget FY25, personal

2025
and corporate income tax reforms are expected to yield PKR 357bn by incorporating
exporters into the regular tax regime and simplifying individual tax brackets. Additionally,
reforms in the sales tax system are projected to generate PKR 286bn by adjusting tax
rates on various products. The expansion of Federal Excise Duty (FED) to cover property
sales and other areas is forecasted to add PKR 413bn to the national coffers. Despite
optimistic projections, we anticipate an overall shortfall in FBR collections for FY25, with
total revenues likely to settle around PKR 11.7trn an estimated 9.6% below the ambitious
PKR 12.97trn target.
Figure: FBR Tax Revenue

(PKR Trn)
14.0
12.2
11.7
12.0
10.0 9.3
8.0 7.2
6.1
6.0 4.8
4.0
4.0
2.0
-
Source (s): MoF, FBR, AHL Research
Lower current expenditure to provide respite: While the revenue side of the fiscal
equation is critical, managing expenditures remains a pressing challenge. Non- ▪ FBR's FY25 revenue target of PKR 12.9trn
overambitious.
development expenditures continue to weigh heavily on the budget, largely due to
▪ Significant interest rate cuts may help reduce
soaring mark-up payments, which surged by 42% in FY24 and are projected to rise debt-servicing costs to PKR 7.8trn (Budgeted:
another 20% in FY25, reaching an anticipated PKR 9.8trn. However, substantial interest PKR 9.8trn).
rate cuts could help ease debt-servicing costs. The government’s recent T-bill buyback ▪ Develop. exp likely to fall short of the PKR
1.7trn budgeted number.
program, funded by SBP profits, also aims to reduce debt levels. We estimate that these
measures could bring debt servicing down to approximately PKR 7.8trn 4.1% lower YoY
than FY24's PKR 8.2trn and well below the budgeted PKR 9.8trn for FY25. Additionally,
with a tighter grip on expenses, development spending may also fall short of the
budgeted PKR 1.7trn, potentially landing closer to PKR 1trn by year-end.
Figure: Breakdown of expenditure

Current Expenditure Development and net lending
(PKR bn) (PKR bn)
Total Expenditure (RHS)
18,000 18,000
16,000 16,000
14,000 14,000
12,000 12,000
10,000 10,000
8,000 8,000
6,000 6,000
4,000 4,000
2,000 2,000
0 0

2025
Looking beyond FY25, the government’s broader fiscal strategy emphasizes the need
for structural reforms to sustain fiscal health. This includes broadening the tax base,
enhancing tax administration, combating evasion, and reducing corruption. Collaboration
between federal and provincial governments is also crucial, with provinces expected to
contribute to fiscal surpluses, targeting ~1% of GDP in FY25e. The EFF with the IMF
aims for gradual fiscal consolidation, setting a long-term goal of achieving a primary
surplus of 2% of GDP, supported by a 3% of GDP net revenue mobilization effort.
Figure: Total public debt (%) Figure: Markup expense as % of FBR revenue
Domestic Debt External Debt* 100%

(USD bn)
Debt to GDP (RHS) 88%
90%
100 80.0%
79%
90 80%
75.0% 67%
80 70%
70 58%
70.0% 60%
52%
60
50%
50 65.0%
40%
40
60.0% 30%
30
20 20%
55.0%
10 10%
- 50.0%
0%
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23
FY24
FY25e
FY21 FY22 FY23 FY24 FY25e
Source (s): MOF, AHL Research, *including IMF Source (s): FBR, MOF, AHL Research
Exhibit: Pakistan Fiscal Operations

PKR bn FY23 FY24 FY25e FY26f
Gross Revenue Receipts 8,880 12,361 16,547 16,263
FBR Taxes 7,169 9,311 11,719 12,205
Non-Tax Revenue 1,711 3,050 4,828 4,057
Less: Provincial Share 4,223 5,264 6,876 7,079
Net Revenue Receipts 4,656 7,098 9,671 9,184
Total Expenditure 11,332 14,823 16,018 17,043
Current Expenditure 10,732 14,073 15,167 15,690
Mark-up Payments 5,696 8,160 7,825 7,981
Defence 1,586 1,859 2,122 2,228
Grants 1,070 1,395 1,777 1,866
Subsidies 1,080 1,067 1,363 1,431
Pension 666 808 1,115 1,171
Running of Civil Govt and Others 634 784 965 1,013
Federal PSDP 743 732 1,000 1,050
Federal Budget Balance (6,676) (7,725) (6,348) (7,859)
Provincial Surplus 155 518 655 650
Overall Budget Balance (6,521) (7,207) (5,693) (7,209)
Primary Balance (826) 953 2,132 772

2025
Structural reforms - Strategic necessities

Pakistan is on the verge of a transformative shift as it embarks on an ambitious
privatization agenda aimed at alleviating the long-standing fiscal burden of inefficient and ▪ Pakistan plans to privatize 24 state-owned
loss-making SOEs. With the decision by the Cabinet Committee on Privatization (CCOP) enterprises from 2024 to 2029 to alleviate fiscal
burdens.
to approve the sale of 24 public sector entities, the government has made clear its intent ▪ All SOEs are to be integrated into a new legal
to streamline its role in the economy over the next five years, covering 2024-2029. This framework by Jun’25, and the Sovereign Wealth
initiative signifies a major policy shift, with even profitable SOEs potentially being Fund Act will be revised by Dec’24.
considered for privatization, underscoring the administration's commitment to structural

economic reforms.
Economic revitalization via privatization: The need for privatization has never been
more critical. Historically, SOEs have been a substantial drain on Pakistan’s public
finances, contributing to chronic budget deficits and stifling economic growth. In FY23
alone, 23 of these entities collectively posted a staggering loss of PKR 905bn, while the
country’s top 15 profit-making SOEs only managed to generate a profit of PKR 687bn.
The inefficiencies within these enterprises have diverted much-needed resources away
from essential sectors such as healthcare, education, and infrastructure, underscoring
the necessity of privatizing these assets to improve fiscal stability.
Figure: Top 10 profit making entities Figure: Top 10 loss making entities
(PKR bn)
(PKR bn) OGDC NHA
PPL QESCO
PARCO PESCO
NBP PIA
Govt Holdings (Pvt) Ltd Pakistan

Railways
National Power Parks Mgmt LESCO
PNSC SEPCO
Port Qasim Authority Pak. Steel Mills
GEPCO MEPCO
PKIC SSGC
- 50.0 100.0 150.0 200.0 250.0 - 100.0 200.0 300.0 400.0 500.0
Source (s): MoF, AHL Research Source (s): MoF, AHL Research
Beyond privatization- Comprehensive SOE reforms: Privatization is only one

component of a broader structural reform agenda. As part of its commitments to the IMF,
Pakistan is also pursuing comprehensive reforms in governance and legal frameworks
governing SOEs. The recently adopted SOE Act, along with the establishment of a
Central Monitoring Unit (CMU) in 2023, represents key milestones in this process. These
reforms aim to modernize the management and oversight of SOEs, ensuring that only
those with significant strategic, social, or security importance remain under state control.
All others will either be privatized or restructured to improve efficiency and reduce their
drain on public resources.
Further reforms are in the pipeline, with plans to bring all SOEs under the new legal
framework by Jun’25 and to revise the Sovereign Wealth Fund Act by Dec’24. These
legal adjustments will be complemented by efforts to improve the governance structures

2025
of key statutory SOEs and to implement the SOE triage plan, which will help classify
enterprises based on their strategic importance and financial viability. Additionally, with
support from the Asian Development Bank (ADB), privatization and restructuring plans
are being refined to ensure a smooth transition for the selected enterprises.
Beyond SOE reform, the government is also focused on enhancing transparency and
governance across the public sector. Anti-corruption initiatives are being strengthened,
with a Governance and Corruption Diagnostic Assessment report set to be published by
July 2025. Moreover, asset declarations of high-level public officials are expected to be
publicly accessible by Feb’25, with appropriate safeguards for personal data. These
measures are expected to reduce corruption, enhance public trust, and create a more
transparent business environment. On the trade front, as per the latest IMF report, the
authorities are working to further liberalize trade policies by reducing tariffs and
simplifying import/export documentation. These reforms are part of the National Tariff
Policy (2025-2029) and are aimed at boosting competitiveness, facilitating private sector
growth, and promoting export-led economic development.
Exhibit: Pakistan - Structural Conditionality

Some of the key structural benchmarks Rationale Status
Fiscal
Do not grant tax amnesties, and do not issue any new preferential tax treatment Protect tax revenue Continuous
Seek ex-ante parliamentary approval for any expenditures that are non-budgeted or that Improved parliamentary oversight of
Continuous
exceed the budgetary appropriation. budget execution
Address the mismatch of federal and
Approve a National Fiscal Pact devolving some spending functions to the provinces. Sep'24 end
provincial revenues and expenditures
Share with the IMF staff a report detailing actions to reduce the federal government's footprint. Reduce the footprint of the state Sep'24 end
Each province amends their Agriculture Income Tax legislation and regime so that taxation
Protect tax revenue Oct'24 end
can commence from January 1, 2025.
Fully implement compliance risk management measures in Large Taxpayer Units Improve tax compliance Dec'24 end
Introduce a 5 percent FED on fertilizer and pesticide. Protect tax revenue Jun'25 end
Monetary and Financials
Average premium between the interbank and open market rate will be no more than 1.25
Maintain FX market functioning Continuous
percent during any consecutive 5 business day period.
Parliamentary approval of amendments to the bank resolution and deposit insurance
Strengthen crisis management toolkit Oct'24 end
legislation
Place undercapitalized private banks under resolution unless (i) these banks are fully
recapitalized by end-October 2024; or (ii) a legally binding agreement is in place by end-
Enforce regulatory standards Nov'24 end
October 2024 towards a merger with other banks or with a new sponsor that would
achieve full recapitalization by April 2025.
Improve safeguards in monetary policy
Implement revised regulations on risk mitigating measures. Sep'25 end
operations
Energy Sector
Complete all policy actions needed to prepare two DISCOs for privatization Improve DISCO management and
Jan'25 end
and concession transactions. efficiency
Push captive gas users on to the
Eliminate captive power usage in the gas sector. electricity grid and channel gas to the most Jan'25 end
efficient generators
Public notification by the government of the December 2024 semiannual gas
Maintain tariffs at cost recovery levels Feb'25 end
tariff adjustment determination.
State-Owned Enterprises and Investment Policy
Improve SOE governance by bringing all
SOEs into line with the SOE legal
Amend the SWF Act and other legislation, in consultation with Fund staff and in line
framework approved in 2023 and Dec'24 end
with MEFP
strengthen SWF governance and
accountability.
Improve SOE governance by bringing all
Amend the laws for 10 additional statutory SOEs, in consultation with Fund staff and
SOEs into line with the SOE legal Jun'25 end
in line with MEFP.
framework approved in 2023
Prepare a plan based on the assessment conducted to fully phase out all current Improve efficiency and provide a level
Jun'25 end
Special Economic Zone incentives by 2035. playing field for investment
Source (s): IMF, AHL Research

2025
Trade dynamics and deficits

Pakistan’s external account in FY24 saw encouraging shifts, driven by stabilization
efforts that curbed long-standing imbalances. FY24 witnessed a significant reduction in ▪ CAD for FY25e: USD 1.0bn (-0.3% of GDP).
▪ Trade deficit for FY25 expected around USD
the current account deficit, which shrank to USD 1.7bn from USD 3.3bn in FY23. Looking 30bn, driven by a 10% YoY increase in imports
ahead to FY25, we expect the current account deficit to remain manageable, projected and a 3% growth in exports.
▪ Remittances FY25e: +15% YoY to USD 34.7bn
at USD 1.0bn, which translates to -0.3% of GDP. This marks a continued commitment to
economic stabilization, building on the modest performance of FY24, where the deficit
was confined to a mere 0.5% of GDP.
Turning to trade dynamics, we project a trade deficit of USD 30bn for FY25e, reflecting
an increase from the previous fiscal year. This reflects an increase from the previous
fiscal year, driven by a robust 10% YoY rise in imports, while exports are expected to
grow at a more conservative 3%. Despite the challenges posed by the global economic
climate, the government’s strategic initiatives aimed at enhancing export-oriented
sectors, along with declining oil prices, offer a glimmer of hope for improving the trade
balance.
Vigilance remains concerning non-essential imports: In recent years, managing

imports has become a critical focus for Pakistani authorities. Initially, strict restrictions
were implemented to curb imports in response to economic pressures, but these
measures have since been relaxed, leading to a more flexible import regime. While
formal restrictions on imports have been lifted, vigilance remains concerning non-
essential items. This cautious stance is influenced by the current reserve position of USD
11.2bn and the imperative to navigate upcoming debt repayments throughout FY25. The
import sector is poised for significant growth in key areas, we believe. As per our
estimates, petroleum products are projected to see a 7% YoY increase (with an
assumption of 5% rise in volume), machinery is expected to grow by 11% YoY, and
textiles are set to soar by an impressive 42% YoY, primarily driven by a surge in cotton
imports.
Figure: Breakdown of imports Figure: Historical trend of imports
(USD mn) (USD mn) Total Imports YoY (RHS)

FY26
80,000 40%
6.8 15.8
70,000 30%
Petroleum Group
6.7 60,000
6.8 20%
Agri. & Other 16.2
5.7 50,000
Chemicals 10%
Machinery Group 40,000
FY25 0%
Food Group 5.7 5.5 30,000
-10%
20,000
Textile Group
6.2 10.9 -20%
10,000
Metal Group 6.4 13.1
8.2 - -30%
FY19
FY17
FY18
FY20
FY21
FY22
FY23
FY24
FY25e
FY26f
Others
8.5

2025
Seizing the export opportunities: On the export front, optimism surrounds an 11%
boost in textile exports, partly fueled by a shift of orders from Bangladesh amid its internal
challenges. However, agricultural exports may experience a decline of ~9%, attributed
to reduced wheat production and intensified competition from India in the rice export
market. Encouragingly, Pakistan’s IT sector is experiencing remarkable growth. In the
first quarter of FY25, total IT exports reached USD 877mn, marking a remarkable 34%
YoY increase. This highlights the substantial potential for service exports to positively
impact the trade balance. As the government navigates these evolving dynamics,
focusing on enhancing service exports and diversifying the overall export landscape will
be essential for fostering economic resilience and maintaining a balanced trade outlook.
Figure: Breakdown of exports Figure: Historical trends of exports

Total Export YoY (RHS)
(USD mn) (USD mn)
40,000 35%
3.69 FY26
35,000 28%
3.41
Textile Group 30,000 21%
3.95
4.05 25,000 14%
Food Group
FY25 18.04 20,000 7%
Other Manufacture 19.31 15,000 0%

6.44
6.78 10,000 -7%
Others
5,000 -14%
- -21%
FY17
FY18
FY19
FY20
FY21
FY22
FY23
FY24
FY25e
FY26f
Source (s): AHL Research Source (s): SBP, AHL Research
Remittances on a strong upward trajectory: Remittances, a crucial pillar of Pakistan's

external account, have shown a commendable increase of 11% YoY in FY24, buoyed by
improving macroeconomic conditions and the stability of the PKR. This influx of
remittances is expected to contribute significantly to the external account, with estimates
suggesting a total of USD 34.7bn in FY25e. Moreover, as the backlog of dividend
payments has been addressed and interest rates have begun to decline, we anticipate
the primary deficit to normalize in FY25, which had surged by 56% YoY in FY24, further
supporting the overall economic picture. Several key factors are contributing to the
anticipated improvement in remittances for Pakistan. Firstly, the stability of the PKR
against the US dollar is playing a crucial role. Additionally, the narrowing spread between
interbank and open market exchange rates is making it more appealing for remittance
senders to transfer funds through formal channels rather than informal ones. Finally, an
increase in the number of Pakistani workers moving abroad is further bolstering
remittance inflows.

2025
Exhibit: Country wise remittances Figure: Historical trend of total remittances

USD mn FY23 FY24 FY25e FY26f
Saudi Arabia 6,533 7,424 8,591 9,021 (USD mn) Total Remittances YoY (RHS)
UAE 4,656 5,535 7,037 7,389 40,000 30%

Other GCC Country 3,198 3,180 3,603 3,783 35,000 25%
UK 4,073 4,522 5,353 5,621 30,000 20%
USA 3,168 3,531 3,509 3,684 15%
25,000
EU Countries 3,134 3,531 3,973 4,172 10%
20,000
Australia 593 644 726 763 5%
15,000
Canada 552 505 560 588 0%
Norway 111 107 113 119 10,000 -5%
Japan 75 52 59 62 5,000 -10%
Switzerland 44 46 49 52 - -15%
FY18
FY17
FY19
FY20
FY21
FY22
FY23
FY24
FY25e
FY26f
Others Countries 1,196 1,174 1,114 1,055
Total 27,333 30,251 34,688 36,308
Foreign investment surges with improving confidence: Talking about foreign

investment, Pakistan is taking proactive steps to attract and retain capital through the
SIFC. This initiative is designed to create a more investor-friendly climate, with a
particular focus on engaging key regional players such as Gulf countries, Turkey, and
China. Particularly, the UAE recently committed to investing USD 10bn across major
sectors, while Saudi Arabia is expediting an initial USD 5bn investment, primarily
targeting the minerals sector, including the Reko Diq. These commitments highlight a
growing interest in Pakistan's economic potential, but the actual execution of these
investments will be critical in determining their impact on foreign investment flows. In
addition, net foreign direct investment reached USD 2.0bn in 9MCY24, marking the
highest level since 9MCY08. The substantial increase in FDI is driven by Chinese
investment, which accounts for 30% with a contribution of USD 686mn, followed by Hong
Kong with a share of USD 19mn. The major sector for FDI is Power, attracting USD
677mn, followed by Financial Business and E&P’s, with net FDI of USD 564mn and USD
451mn, respectively.

2025
Figure: Historical trend of current account deficit Figure: Historical trend of trade balance
(USD mn) Current Account Deficit YoY (RHS) Trade Deficit YoY (RHS)
(USD mn)
25,000 680% 48,000 54%
20,000 510% 40,000 36%
32,000 18%
15,000 340%
24,000 0%
10,000 170%
16,000 -18%
5,000 0%
8,000 -36%
0 -170% - -54%
FY17
FY18
FY19
FY20
FY21
FY22
FY23
FY24
FY25e
FY26f
FY23
FY17
FY18
FY19
FY20
FY21
FY22
FY24
FY25e
FY26f
Exhibit: Current Account Balance

USD mn FY23 FY24 FY25e FY26f
Current Account Balance (3,275) (1,695) (1,044) (2,459)
% of GDP -1.0% -0.5% -0.3% -0.6%
Exports of Goods 27,876 30,967 31,932 33,725
Imports of Goods 52,695 53,056 59,422 63,251
Balance on Trade in Goods (24,819) (22,089) (27,490) (29,525)
Exports of Services 7,596 7,870 8,244 8,708
Imports of Services 8,638 10,692 10,790 11,770
Balance on Trade in Services (1,042) (2,822) (2,546) (3,062)
Balance on Trade in Goods and Services (25,861) (24,911) (30,036) (32,588)
Balance on Primary Income (5,765) (8,996) (8,116) (8,700)
Balance on Secondary Income 28,351 32,212 37,108 38,828
Workers' Remittances 27,333 30,251 34,690 36,308
Source (s): SBP, AHL Research

2025
Revitalizing Pakistan’s economy with IMF support

Pakistan has successfully signed a crucial agreement with the IMF for a 37-month ▪ Pakistan has secured an EFF facility from the
Extended Fund Facility valued at ~USD 7bn. This arrangement follows the completion IMF, valued at USD 7bn.
of a USD 3bn Stand-By Arrangement (SBA) and arises from a challenging economic ▪ For FY25, the financing plan includes USD
16.4bn in rollovers.
environment where securing such financing was not merely an option but a vital ▪ Pakistan eyeing another short-term IMF facility of
necessity. The program is fully financed, featuring firm commitments for the first 12 USD 1bn under RSF.
months, with promising prospects thereafter.
Bridging funding gap: For FY25, financing includes about USD 16.8bn in rollovers of
existing short-term financing and an additional USD 2.5bn in commitments from key
partners, such as China, Saudi Arabia, ADB, and the Islamic Development Bank (IsDB).
Additionally, authorities have received firm commitments from essential bilateral partners
to maintain their existing exposures throughout the program, ensuring continued rollover
of existing short-term liabilities, which will help meet financing needs during the remaining
program period. Loans from foreign commercial banks totaling USD 6.6bn, renewed
during the previous EFF and SBA, are also expected to continue during this new
program. Together with commitments from multilateral institutions, these arrangements
provide necessary financing assurances.
Exhibit: History of Lending Commitments

Amount Agreed SDR Amount Drawn SDR
Date of Arrangement Expiration Date
mn mn
Standby Arrangement
Dec-58 Sep-59 25 0
Mar-65 Mar-66 38 38
Oct-68 Oct-69 75 75
May-72 May-73 100 84
Aug-73 Aug-74 75 75
Nov-74 Nov-75 75 75
Mar-77 Mar-78 80 80
Dec-88 Nov-90 273 194
Sep-93 Feb-94 265 88
Dec-95 Sep-97 563 295
Nov-00 Sep-24 465 465
Nov-24 Sep-24 7,236 4,936
Jul-24 Apr-24 2,250 2,250
Extended Fund Facility
Nov-80 1-Dec 1,268 349
Dec-81 Nov-83 919 730
Oct-97 Oct-00 455 114
Sep-13 Sep-16 4,393 4,393
Jul-19 Jun-23 4,988 2,144
Sep-24 Oct-24 5,320 760
Feb-94 Dec-95 379 123
Oct-97 Oct-00 682 265
Feb-94 Dec-95 607 172
Dec-24 1,034 861
Structural Adjustment Facility Commitment
Dec-88 Dec-91 382 382
Total 31,947 18,948
Source (s): IMF, AHL Research

2025
Implementation of comprehensive reforms: Under the EFF program, Pakistan is set
to implement comprehensive reforms aimed at tackling persistent structural issues that
have long impeded economic growth. These reforms include enhancing fiscal and
monetary policies, broadening the tax base, and improving the management of SOEs.
To secure the agreement, the government committed to implementing crucial reforms
across various sectors, including energy, taxation, and fiscal management. These
reforms are not only essential for immediate stabilization but also for steering the country
toward long-term structural improvements that foster sustainable economic growth.
Recent media reports indicate that Pakistan has formally requested ~USD 1bnn from the
IMF under the Resilience and Sustainability Facility (RSF), in addition to its ongoing EFF.
The RSF, established in 2022, is designed to provide long-term concessional financing
to help low and middle-income countries address climate-related risks. This funding will
support essential climate-related initiatives, including adaptation measures and the
transition to cleaner energy sources. To highlight, in our report titled Pakistan’s Path to
Enhanced IMF Support, published on March 16, 2024, we emphasized the potential for ▪ EFF program requires reforms to address
structural challenges, emphasizing
Pakistan to engage in an Extended Fund Facility complemented by the newly established
improvements in economic policies,
Resilience and Sustainability Facility. expanding the tax base, and enhancing the
management of SOEs.
Taking cues from the recent IMF’s program for Bangladesh: Amid discussions for a ▪ Pakistan has formally requested ~ USD 1bn
more extensive IMF program, Pakistan can draw insights from Bangladesh's recent from the IMF under RST.
program, which featured a larger quantum of assistance a direction Pakistan also

requires. Bangladesh secured significant financial support, including SDR 2.5bn (~USD
3.3bn) under the Extended Credit Facility (ECF) and the Extended Fund Facility (EFF)
arrangements. Furthermore, the IMF also approved SDR 1bn (~USD 1.4bn) under the
newly established RSF. Bangladesh's successful access to the RSF positions it as the
first Asian country to do so, prompting speculation that Pakistan may seek similar
financial instruments to address its economic challenges. The IMF-supported program
under the ECF/EFF arrangements will help preserve macroeconomic stability and
prevent disruptive adjustments to protect the vulnerable, while laying the foundations for
strong, inclusive, and environmentally sustainable growth. The concurrent RSF
arrangement will supplement the resources made available under the ECF/EFF to
expand the fiscal space to finance climate investment priorities identified in the
authorities’ plans, help catalyze additional financing, and build resilience against long-
term climate risks.
According to the IMF's country report, Pakistan faces a gross financing requirement of
USD 51bn for the fiscal years 2025 to 2027. Of this total, ~USD 10-11bn is rolled over
annually, reflecting a consistent figure each year. The net repayable amount stands at
around USD 8-9bn per year, with an estimated USD 4-5bn comprising payments to
multilateral creditors. Positively, Pakistan receives roughly the same amount annually in
inflows from these multilateral sources, indicating that the net repayable amount can be
managed effectively, provided timely rollovers continue. However, rather than relying
solely on annual rollovers, it would be more prudent for the government to seek loan
reprofiling to distribute the debt burden over a more extended period, thereby easing
fiscal pressures. Continued engagement with the IMF is crucial for Pakistan as it
addresses these economic challenges. This relationship is vital for attracting inflows from
other lenders, securing FDI, and reentering international capital markets.

2025
Exhibit: Different IMF programs and Pakistan’s engagements
Facility Purpose Duration Repayment Conditionality
Respond to countries’ external financing needs by

Up to 3 years but Due within 3¼-5 years
SBA supporting their adjustment policies with short-term
usually 12-18 months of disbursement.
financing. Ex-post, and ex-ante (prior
Grace period of four actions) if needed
Support low-income countries (LICs) that have reached
SCF 1 to 3 years years and a final
broadly sustainable macroeconomic positions.
maturity of eight years.
Over 4½–10 years in
Provide assistance to countries experiencing serious
EFF Up to 4 years 12 equal semiannual
payment imbalances. Ex-post, with focus on
installments.
structural reforms. and ex-
Assist eligible countries with a protracted balance of ante (prior actions) if
Grace period of 5½
payments problem to implement economic programs that 3 to 4 years, needed
ECF years, and a final
make significant progress toward a stable and sustainable extendable to 5 years
maturity of 10 years.
macroeconomic position
Provide rapid, low-access financial assistance to countries
RFI Outright purchase Within 3¼ to 5 years
facing urgent balance of payments needs. No reviews /ex-post
Provide concessional, rapid, and low-access financial Grace period of 5½ conditionality, but ex-ante
Outright (prior actions) possible
RCF assistance to qualifying LICs facing an urgent balance of years, and a final
disbursement
payments need. maturity of 10 years
Provide financial support to countries with very strong
Ex-ante (qualification
economic fundamentals and sustained policy track records Over a 3¼ to 5-year
FCL 1 or 2-year criteria) and annual
to help them meet actual or potential balance of payments period
reviews
needs.
Approved for a
Provide support to countries facing potential, moderate,
period of 12 months Ex-ante (qualification
SLL short-term balance of payment needs related to capital 12 months
with successor SLLs criteria)
account pressures
possible
Provide financial support to meet actual or potential 6-month (liquidity
Over a 3¼ to 5-year Ex-ante (qualification
PLL balance of payments needs of countries with sound window) or 1 or 2-
period criteria) and ex-post
policies that may have some remaining vulnerabilities. year
Minimum duration 18
20-year maturity and a Ex-post, concurrent IMF.
months, cannot
Provide longer-term financing to strengthen economic 10½ -year grace Upper-Credit Tranche
RSF exceed the
resilience and sustainability. period during which no (UCT)-quality
concurrent UCT-
principal is repaid. program required
quality program
6 to 18 months,
SMP1 The PCI is a non-financing upper-credit-tranche instrument longer durations not Not available Ex-post, and ex-ante (prior
designed to help countries demonstrate commitment to a precluded actions) if needed
reform agenda and unlock financing from other sources.
PCI 6 months to 4 years
Source: IMF, AHL Research

2025
Stable PKR- The impact of strengthened reserves

In a remarkable turnaround, the SBP’s foreign exchange reserves have surged past the
USD 11.2bn mark, marking a significant milestone amid ongoing economic challenges. ▪ SBP is expected to end FY25 with reserves
around USD 13bn.
The SBP’s proactive measures during the consolidation phase played a crucial role in ▪ For FY25e, external debt repayments are
managing dollar outflows. By tightening import restrictions and overseeing the projected at USD 26.1bn, with expectations to
repatriation of profits from foreign investments, the central bank effectively stabilized the roll over USD 16.4bn, resulting in a net
repayment of USD 5.7bn.
currency. In FY24, ~USD 12bn of these repayments were made, with an equivalent
amount rolled over. As Pakistan sails through FY25, the outlook appears cautiously
optimistic. External debt repayments are projected to total USD 26.1bn, with expectations
of rolling over USD 16.4bn, leaving a manageable net repayment of USD 5.7bn.
Following the IMF disbursement, the country is well-positioned to attract inflows from
multilateral and bilateral lenders. Initiatives to boost Foreign Direct Investment, enhance
export performance, and eventually re-enter international capital markets are expected
to bolster the external account further. With these strategic initiatives, the SBP is
projected to close FY25 with reserves estimated at USD 13bn. The strengthening of
reserves has played a vital role in stabilizing the PKR. A key catalyst for this recovery
was the nine-month SBA with the IMF, which provided essential policy support and
reinstated effective operations in the foreign exchange market. Additionally, the
government's removal of multiple currency practices and lifting of restrictions on import
advance payments have further contributed to stabilizing the PKR. The recovery of the
PKR has been particularly noteworthy, rebounding from declines of 23% and 28% in
FY22 and FY23, respectively, to a 4% appreciation against the USD in FY24. This
impressive turnaround is a direct result of the increased foreign exchange reserves,
which have instilled confidence in the currency market and attracted investor interest.
Moreover, the recent successful execution of the IMF EFF program has not only
enhanced foreign exchange reserves but is likely to unlock additional funding and
facilitate new borrowing and rollovers from international partners. The IMF program ▪ Strengthened reserves have stabilized the
PKR, supported by the IMF program and the
underscores the importance of maintaining a market-determined exchange rate as a removal of multiple currency practices.
fundamental strategy to rectify external imbalances and support the gradual buildup of ▪ We expect PKR/USD will be around 280 by
reserves. Dec’24 and 288.4 by Jun’25.
Improved reserves to support parity: Looking ahead, forecasts indicate that by Dec’24
and Jun’25, the PKR/USD exchange rates are likely to hover around 280 and 288.4,
respectively. Rebuilding reserves is crucial to ensuring that gross reserves cover at least
three months of imports, supported by disbursements from multilateral and bilateral
loans, along with foreign exchange purchases. Should outflow pressures resurface, the
SBP remains committed to allowing flexible exchange rate adjustments while refraining
from intervening against a trend depreciation. The foreign exchange market has shown
significant improvement, with the interbank-open market spread remaining negligible,
enabling the SBP to make substantial foreign exchange purchases, effectively doubling
its reserves. Our projections for SBP reserves for FY25 are as follows.

2025
Exhibit: Expected inflows and outflows during FY25
Inflows Outflows
USD bn USD bn
IMF 2.02 Repayments 10.00
KSA Rollover 5.00 CAD 1.04
UAE Rollover 3.00 KSA Rollover 5.00
China Rollover 4.00 UAE Rollover 3.00
China Swap 4.00 China Rollover 4.00
Multilateral 5.50 China Swap 4.00
FDI 2.80
Euro Bond/Sukuk 1.50
Commercial (New) 3.00
Total Inflows 30.82 Total Outflows 27.04
SBP Reserves (Jun'24) 9.39
Expected SBP Reserves Position (Jun'25) 13.17
Figure: Historical trend of PKR/USD Figure: Historical trend of SBP reserves and PKR parity
SBP Reserves Period end PKR/USD (RHS)
(USD bn)
350 18 16.1 350
300 15 300
13.1
250 13 250
11.2
10.3
200 10 9.4 200
150 8 150
100
5 4.1 100
50
3 50
-
FY20 FY21 FY22 FY23 FY24 FY25e 0 -
FY20 FY21 FY22 FY23 FY24 FY25e

2025
Rate cuts loom as inflation eases

Pakistan's economy has witnessed a remarkable turnaround following a challenging
▪ Current estimates suggest inflation may decline
period marked by peak inflation rates of 38% in May’23. By Oct’24, inflation has
further to an average of 7.5% in FY25.
significantly eased to 7.2%, reflecting the effectiveness of stringent monetary and fiscal ▪ Combined efforts of stringent monetary and
policies alongside stabilizing energy and food prices. The initial success in controlling fiscal measures have led to a sustained
reduction in inflationary pressures.
inflation was largely influenced by base effects, as energy prices that had previously
surged due to geopolitical tensions could not sustain their trajectory, resulting in a YoY
moderation. Additionally, the sharp increases in food prices, initially exacerbated by
shortages, have begun to stabilize. The combined impact of these factors, bolstered by
tight monetary and fiscal policies, has led to a sustained decrease in inflationary
pressures.
Base effect verses real measures: The initial success in curbing inflation was relatively
straightforward, primarily attributable to base effects. The rapid escalation of energy
prices, driven by geopolitical tensions, could not sustain its steep upward trajectory,
leading to a moderation in year-over-year increases. Moreover, the sharp rise in food
prices, initially exacerbated by shortages, has begun to stabilize. These developments,
coupled with disciplined monetary and fiscal measures, have played a pivotal role in
fostering a sustained reduction in inflationary pressures. The impact of higher interest
rates is increasingly evident, as they systematically alleviate inflationary pressures on
the headline CPI. The momentum of rising prices is diminishing, signaling that monetary
tightening is gradually bringing inflation under control. Should this trend persist, the State
Bank of Pakistan (SBP) is likely to approach its medium-term inflation target of 5-7% by
Sep’25. Current forecasts suggest that inflation may further decline, averaging around
7.5% in FY25, representing a reduction from FY24's average of 23.4%.
Figure: Average National Consumer Price Index
35.00%
29.04%
30.00%
25.00% 23.88%
▪ Further cuts are anticipated by the end of

20.00% FY25, potentially to 12%.
▪ Pakistan's real interest rate stands at ~
15.00% 780bps, with historical averages between
12.09% 1.5% and 2%.
10.77% 9.94%
10.00% 8.90%
7.50%
5.00%
0.00%
Source (s): PBS, AHL Research
Following a prolonged period of stagflation characterized by low growth and high

inflation, the economy is now poised to transition towards moderate growth and
disinflation. Achieving sustainable growth is contingent upon enhancing both domestic
and foreign investment and improving productivity. While discussions often prioritize
foreign investment, it is essential to recognize the critical role of domestic investment. To
foster domestic investment, lower interest rates are necessary, contingent upon a
continued decline in inflation. Thus, maintaining prudent macroeconomic policies is
essential for reducing both inflation and interest rates.

2025
Nevertheless, several risks remain that could impede progress. A significant depreciation
of the PKR against the USD could reignite inflationary pressures. Additionally, major
upward revisions in gas and electricity tariffs may contribute to inflation. Furthermore, a
widening demand-supply gap for food commodities exacerbated by rising demand and
adverse weather conditions affecting crop yields could lead to persistent food inflation.
Sales tax sensitivity analysis: One of the proposals to bridge the tax collection gap is Exhibit: Sensitivity Analysis - Sales tax on POL
to implement a sales tax on petroleum products. In 4MFY25, the revenue shortfall has
Sales Tax Revenue FY25 Avg
reached ~PKR 190bn. Since Jan’22, the government has been charging zero sales tax tax (PKR bn) Inflation
on these products. However, we have already factored in a 5% sales tax on petroleum Base Case 5.0% 130 7.50%
products starting from Dec’24 in our base case. To provide more insight, we have run a
Case-1 10.0% 260 7.67%
sensitivity analysis on the potential increase in sales tax and its impact on both inflation
Case-2 15.0% 391 7.84%
and tax revenue. Please refer to the table.
Case-3 18.0% 469 7.95%
To support economic growth, the SBP implemented its first rate cut in June 2024, Source (s): AHL Research
reducing the policy rate by 150bps, followed by a 100bps cut in July, 200bps in
September, and a 250bps reduction in November, bringing the rate down to 15%.
However, given that inflation projections suggest the base effect will end by the close of
1QCY25, we believe the SBP will adopt a more cautious stance going forward, likely
reducing the policy rate to 12% by the end of FY25. Pakistan's real interest rate remains
exceptionally high, reaching ~7.8% on a spot basis. Even on a forward 12-month basis,
real interest rates hover around 694bps. Historically, Pakistan's average real interest rate
has ranged between 1.5% and 2%, indicating substantial room for rate cuts to bring the
real interest rate closer to historical norms.
Figure: Trend of National CPI and Core Figure: Real Interest Rates in Pakistan
Core Inflation Food Inflation CPI (RHS) RiR (RHS) Core Inflation Policy Rate
29% 30% 24% 12%
21% 9%
24% 25%
18%
6%
19% 20%
15%
3%
14% 15% 12%
0%
9%
9% 10%
-3%
6%
4% 5% -6%
3%
-1% 0% 0% -9%
Jul-24
Jan-24
Jun-24
Jan-25
Jun-25
Apr-24
Aug-24
Sep-24
Oct-24
Nov-24
Dec-24
Apr-25
Feb-24
Mar-24
May-24
Feb-25
Mar-25
May-25
Jul-24
Jan-24
Jun-24
Aug-24
Sep-24
Nov-24
Dec-24
Jan-25
Jun-25
Mar-24
Apr-24
Oct-24
Mar-25
Apr-25
Feb-24
May-24
Feb-25
May-25
Source (s): PBS, AHL Research Source (s): PBS, SBP, AHL Research
In its recent statement following the signing of the Staff-Level Agreement for the
Extended Fund Facility program, the IMF underscored the need for monetary policy to
prioritize disinflation in order to protect real incomes, particularly for vulnerable
populations. Lowering the policy rate to 13.5% by Dec’24 and 12% by Jun’25 aligns with
the IMF's guidance, as the current rate of 15% remains higher than what is needed for a
disinflationary stance, we believe.

2025
Emerging signs of modest growth

Pakistan is on a positive trajectory of recovery, with FY24 showcasing a GDP growth rate
of 2.5%. Looking ahead to FY25e, we expect growth to be around same level that is ▪ FY25e GDPg is projected at 2.4%,
slightly down due to agriculture
2.4%. However, we expect potential for healthier growth in FY26f, which we anticipate sector setbacks.
could rebound to 4.7%. This modest growth in FY25e could have been higher had the ▪ Growth rebound to 4.7% in FY26f
agriculture sector not faced setbacks, primarily due to the low cultivation of important expected.
▪ Future progress depends on effective
cash crops. While this figure remains below the long-term average of 3.5%, the potential
government economic policies.
for progress hinges on the government's ability to maintain a balanced and effective
economic policy.
Agriculture growth to remain subdued: The robust 16.8% increase in major crops
during FY24 has been a defining factor in Pakistan's economic growth narrative.
However, as we look ahead to FY25e, the outlook appears less favorable, with a
projected slight increase in output of 0.42%. In light of this, farmers are reassessing their
sowing strategies for staple wheat, particularly after the Punjab government’s failure to
procure grain last season an issue of significant concern, given that Punjab contributes
70% of the nation’s wheat production. Additionally, challenges such as water scarcity
and rising temperatures have already begun to adversely affect cotton sowing and yields.
The situation is further complicated by India’s re-entry into the global rice export market,
which poses a risk to Pakistan's multibillion-dollar rice exports.
Industries and Services to support growth: As the agriculture sector is projected to

contract in FY25e, two vital sectors industry and services are expected to propel
economic growth, with anticipated growth rates of 2.62% and 3.23%, respectively. In the
first two months of FY25, large-scale manufacturing (LSM) has experienced a slight YoY
decline of 0.19%, primarily driven by low demand and high cost of doing business.
Moreover, this marks the first time in six months that cumulative LSM growth has turned
negative, suggesting a slow and uneven recovery trajectory. This downturn occurs
against the backdrop of a historically low base. However, there is cautious optimism on
the horizon, as a reduction in interest rates and currency stabilization are projected to
facilitate a rebound in LSM, which has encountered numerous obstacles in recent years.
With positive trends emerging in food, textiles, and automobiles, these sectors are likely
to be key contributors to the economy, alongside the export-oriented industries for FY25.
Expectations are particularly high for growth in textiles and apparel, especially as orders
shift from Bangladesh following recent turmoil there. The automobile sector is also poised
for recovery, aided by the reversal of the interest rate cycle already in progress.
Meanwhile, the food sector has remained robust with minimal fluctuations, and the
performance of the sugar crop will be crucial in shaping sectoral growth in the on-going
quarter of FY25.
We anticipate that the growth momentum in the services sector will persist into FY25,
bolstered by developments in commodity-producing sectors and increased goods
imports. Specifically, LSM is expected to contribute positively to this growth. Merchandise ▪ Agri- sector growth est. to grow at +0.42%
imports are projected to rise to USD 59.4bn in FY25e, up from USD 53bn last year, in FY25.
reflecting an expansion in economic activities that will positively impact wholesale and ▪ Industry is expected to grow by 2.62%.
▪ Services are projected to grow by 3.23%.
retail trade as well as the transport sectors during the review period. In addition to these
▪ LSM and wholesale & retail trade -key
trends, the services sector particularly wholesale and retail trade, along with finance and contributors to economic growth.
insurance is poised to maintain its upward trajectory, supported by favorable policies
from the SBP. A standout area is Pakistan’s rapidly expanding IT industry, which has
demonstrated remarkable growth in export earnings for FY24.

2025
Key risks: However, the path to sustained growth is not without its challenges.
Geopolitical uncertainties, global inflationary pressures, and a potential rise in oil prices
could drive up inflation, increasing costs for consumers and businesses alike. These
factors will play a crucial role in shaping the country’s overall economic performance in
the coming fiscal year. Overcoming these challenges will be essential for maintaining
growth momentum. Continued monetary easing, coupled with efforts to lower business
costs such as cutting energy prices could create a more supportive environment for
economic growth. Attracting foreign investment and boosting export potential will be key
in strengthening the economy. Additionally, addressing the effects of climate-related
risks, especially in the agricultural sector, will be crucial to keeping the recovery on
course.
Various organizations have forecasted Pakistan's GDP growth with differing outlooks for
the ongoing fiscal year FY24-25. BMI, a Fitch Solutions company, projects growth at
3.2%, while the Asian Development Bank (ADB), in its Asian Development Outlook,
anticipates GDP growth of 2.4% for 2024 and 2.8% for 2025. The International Monetary
Fund (IMF) offers a more optimistic estimate of 3.5% for FY2024-25. Additionally, the
State Bank of Pakistan (SBP), in its recent State of the Economy report, expects GDP
growth to fall within the range of 2.5% to 3.5%, supported by lower borrowing costs and
a gradual recovery in the large-scale manufacturing and services sectors.
Figure: Historical trend of GDP growth Figure: Historical trend of Per Capita GDP (in USD)
(USD)
7.0%
6.2% 1,900 1,847
6.0% 5.8%
1,800 1,767
1,745
5.0% 4.7%
1,700 1,677 1,673
4.0%
1,600 1,553
3.0% 2.5% 2.4%
1,500 1,458
2.0%
1,400
1.0%
1,300
0.0%
FY20 FY21 FY22 FY23 FY24 FY25e FY26f 1,200
-0.2%
-1.0% FY20 FY21 FY22 FY23 FY24 FY25e FY26f
-0.9%
Source (s): MoF, AHL Research Source (s): MoF, AHL Research

2025
Figure: Industrial sector breakdown Figure: Agriculture sector breakdown Figure: Service sector breakdown
FY25e FY24 FY25e FY24 FY25e FY24
8.0% 4.5% Human Health & 5.0%

Small Scale Livestock
9.1% 4.5% Social Work 5.6%
5.0% 3.0% 5.0%

Construction Forestry Education
-1.5% 3.0% 8.5%
4.1% 1.0% Accommodation 4.1%

Manufacturing Other Crops
3.1% -1.2% & Food Services 4.1%
-2.0% 3.0% 8.0% 13.0% -10.0% 0.0% 10.0% 0.0% 3.0% 6.0% 9.0%
Source (s): PBS, AHL Research
Exhibit: Gross Domestic Product of Pakistan

Items FY23 FY24 FY25e FY26f
Commodity Producing Sector -0.5% 3.0% 1.4% 4.4%
Agriculture Sector 2.2% 6.4% 0.4% 4.1%
1. Crops -1.2% 10.3% -6.9% 4.6%
2. Livestock 3.7% 4.5% 4.5% 4.0%
3. Forestry 16.6% 3.0% 3.0% 3.0%
4. Fishing 0.6% 0.8% 0.9% 1.0%
Industrial Sector -3.7% -1.1% 2.6% 4.8%
1. Mining & Quarrying -3.2% 3.5% 3.5% 3.5%
2. Manufacturing -5.3% 3.1% 4.1% 5.6%
3. Electricity Generation & Distribution & Gas Distribution 9.9% -23.1% -10.0% 3.0%
4. Construction -9.2% -1.5% 5.0% 3.0%
Service Sector 0.0% 2.2% 3.2% 4.9%
1. Wholesale & Retail trade -4.0% 3.4% 3.4% 9.2%
2. Transportation & Storage 3.8% 1.9% 1.9% 1.9%
3. Accommodation and Food Services Activities 4.1% 4.1% 4.1% 4.1%
4. Information and Communication -0.7% 0.3% 2.0% 2.0%
5. Financial and Insurance Activities -10.0% -10.7% 2.0% 2.0%
6. Real Estate Activities (OD) 3.7% 3.7% 4.0% 3.0%
7. Public Administration and Social Security -7.0% -7.3% 3.0% 3.0%
8. Education 5.1% 8.5% 5.0% 5.0%
9. Human Health and Social Work Activities 8.8% 5.6% 5.0% 2.5%
10. Other Private Services 4.2% 3.6% 3.5% 3.5%
GDP Growth -0.2% 2.5% 2.4% 4.7%

2025
Exhibit: Key Economic Indicators
FY21 FY22 FY23 FY24 FY25e FY26f
Real
GDP Growth 5.8% 6.2% -0.2% 2.5% 2.4% 4.7%
Nominal GDP $ bn 348.9 375.6 338.5 373.8 413.7 441.0
CPI and Policy Rate
CPI (YoY average) 8.9% 12.2% 29.0% 23.4% 7.5% 9.9%
Policy Rate (Period end) 7.0% 13.8% 22.0% 20.5% 12.0% 12.0%
External Sector
Exports (Goods) $ bn 25.6 32.5 27.9 31.0 31.9 33.7
Imports (Goods) $ bn 54.3 71.5 52.7 53.1 59.4 63.3
Trade Deficit (Goods) $ bn 28.6 39.1 24.8 22.1 27.5 29.5
Remittances $ bn 29.5 31.3 27.3 30.3 34.7 36.3
FX Reserves (Period end) $ bn 24.4 15.5 9.2 14.0 4.6 4.6
SBP FX Reserves (Period End) $ bn 17.3 9.8 4.4 9.4 13.2 13.7
Bank FX Reserves (Period End) $ bn 7.1 5.6 4.7 4.6 4.6 4.6
Exchange Rate (Period end) USD/PKR 157.5 204.8 286.0 278.3 288.4 305.7
PKR Appreciation / (Depreciation) (%) 6.7 (23.1) (28.4) 2.7 (3.5) (5.7)
Debt
Domestic PKR bn 26,265 31,085 38,810 47,160 50,576 54,902
External $ bn 86.5 88.8 84.1 86.5 88.4 92.4
Fiscal Sector
Total Revenue PKR bn 6,270 7,328 8,880 12,361 16,547 16,263
FBR Taxes PKR bn 4,764 6,143 7,169 9,311 11,719 12,205
Nontax Revenue PKR bn 1,505 1,185 1,711 3,050 4,828 4,057
Total Expenditure PKR bn 7,245 9,350 11,332 14,823 16,018 17,043
Current Expenditure PKR bn 6,349 8,452 10,732 14,073 15,167 15,690
Budget Deficit PKR bn 3,403 5,260 6,521 7,207 5,693 7,209
% of GDP
Current Account Deficit 0.8% 4.7% 1.0% 0.5% 0.3% 0.4%
Trade Deficit 8.2% 10.4% 7.3% 5.9% 6.6% 6.7%
Fiscal Deficit 6.1% 7.9% 7.8% 6.8% 4.9% 5.5%
External Debt 24.8% 23.6% 24.8% 23.1% 21.4% 21.0%
Domestic Debt 47.0% 46.6% 46.2% 44.6% 43.5% 41.9%
Source (s): MoF, PBS, SBP, AHL Research

2025
Capital Market
Thrills and gains

2025
KSE100: Re-rating on the cards

Our Dec’25 target for the KSE-100 index is 120,010 points, implying a robust 27% upside
from current levels. The market appears ripe for a rerating in CY25 with declining interest KSE 100 Index Target
rates, a stable PKR, and improving macroeconomic indicators. Domestic liquidity is on Estimates 2025
the upswing, driven by fresh domestic inflows. Pakistan is also on the radar of foreign
investors for debt and equity markets. The momentum for mergers and acquisitions
along with expected FDI are also boosting investor sentiment. Valuation Basis
We expect earnings growth to clock in at 4.2% in 2025. We anticipate earnings growth
to from six sectors out of the eleven under our coverage, with the majority expected to
Target Justified
achieve double-digit growth.
Price PE
Earnings for the E&P sector are projected to decline by 0.6%, amid lower oil and gas
production and the absence of exchange gains. The banking sector is expected to see a
Weight
6.4% decline due to anticipated reductions in interest rates impacting net interest
margins. In contrast, the fertilizer sector is poised for a 11.4% growth, driven by improved
50% 50%
margins and enhanced pricing power. Cement sector growth is forecasted at 32.1%,
underpinned by relatively better demand, stable product prices, and the decline in
interest rates. OMCs are anticipated to post a strong 39.1% increase in earnings,
supported by higher volumes amid economic growth. The auto sector is expected to grow Index
by 19.6%, supported by a revival of demand and increased auto financing facilitated by
lower interest rates. On the downside, the power sector is projected to experience a 119,459 120,561
significant 27.0% decline, primarily due to the termination of HUBC’s base plant. The
textile sector is likely to witness a steep 35.9% decline in earnings, driven by higher tax
rates and shrinking profit margins. Meanwhile, the chemicals sector is projected to
Target 2025 Current Index
achieve a promising 31.6% growth, attributed to better margins compared to the previous
120,010 94,192
year. Finally, the technology sector is set to benefit from the export of IT services and
improved consumer demand for smartphones, expected to post a 39.3% growth.
Expected Return 2025
27.4%
Exhibit: Corporate Sector KSE100 Earnings Growth: Trend & Forecast

(%) 2019a 2020a 2021a 2022a 2023a 2024e 2025e 2026f
Banks 20.7 33.3 13.5 15.5 81.9 -0.6 -6.4 6.5
E&P 46.3 -10.5 -4.6 30.5 68.5 5.9 -0.5 1.5
Fertilizer -4.4 40.3 20.5 -18.0 32.8 62.5 11.4 -3.8
Cement -35.4 nm nm 13.5 -6.7 60.6 32.1 10.7
Power 71.7 63.5 -28.2 -33.0 80.5 57.9 -27.0 -20.9
Technology 135.9 46.0 28.7 43.4 14.5 9.0 39.3 10.1
OMCs -35.3 nm nm 132.4 -71.9 32.2 39.1 8.4
Autos -24.5 -55.0 118.4 22.3 -34.4 128.6 19.6 30.1
Textiles 79.5 -54.5 150.6 91.9 29.8 -31.3 -35.9 71.0
Chemicals -5.0 1.5 102.0 16.8 16.1 -27.1 31.6 19.1
KSE100 5.5 3.9 40.4 16.9 35.3 8.6 4.2 5.5
Source (s): Company Financials, AHL Research

2025
Equities: Preferred asset

class
Falling interest rates, subdued
real estate demand, and
measures against dollarization
has positioned equities as the
preferred asset class.
Buoyant domestic Ready to garner

liquidity: foreign interest:
Domestic liquidity, fueled Foreign holdings dropped
by new funds and fixed- to 3.2% of FF market
income conversions, set cap; Pakistan now on
to drive valuations. radar for equities and
debt flows.
Rising investor
confidence: Boom in M&A
Business confidence activity:
level up 15pts to Next Leg of The country is
54.2pts, default risk experiencing a surge in
at 1,496bps Valuation Re-rating M&A activities, which is
compared to expected to drive
4,740bps (Oct’23) enhanced valuation
discovery.
Supportive macro
FDI inflows on the environment:
horizon:
Declining inflation and
Attracting export-led FDI interest rates, increasing
in agriculture, mining, FX reserves,
and IT, ensuring balance stabilized current account
of payments stability and and stable currency.
unlocking valuations.
Earnings growth:
Earnings growth expected
at 4.2% in 2025, led by
Cement, Fertilizer, OMCs,
Technology, Chemicals
and Autos.
Key Risks:
1. Macro-economic imbalances during the IMF program
2. Volatility in the commodity prices
3. Political instability

2025
Macros to support the market

The strengthening of key economic indicators is a primary driver behind the robust
performance observed in the market. We anticipate that this positive trajectory in ▪ The PSX has historically re-rated during
periods of favorable economic shifts
macroeconomic fundamentals will continue into the coming year, supporting the KSE100 ▪ The convergence of improved economic
index performance. Historically, the PSX has demonstrated a pattern of re-rating during fundamentals with market performance
suggests the KSE-100 index's P/E multiple will
periods of favorable economic shifts, and we believe that the current outlook signals a re-rate
potential re-rating similar to past cycles.
Our analysis of the past 12 years shows that the KSE-100 index’s P/E multiple has re-
rated during four distinct years. The comparison of the key economic indicators from
those periods, specifically, FY14, FY15, FY17 and FY24 with our expectations for FY25,
we observe striking similarities.
The key economic indicators projected for FY25 including inflation, current account as
% of GDP, and foreign exchange reserves are closely aligned with historical benchmarks
observed during previous market re-rating periods. Moreover, robust remittances
momentum (% of imports) expected to be on the higher side during FY25. However,
GDP growth in FY25 is expected to be lower in comparison to the re-rating period.
We believe that this alignment reflects a narrowing gap between market performance
and economic fundamentals. Given this convergence and anticipated improvements in
the country's macroeconomic position, we expect the market's P/E multiple to experience
a re-rating, driving further momentum for the KSE-100 index.
Exhibit: Key Economic Indicators
CPI (YoY Policy Rate CAD Remittances SBP Reserves

P/E Real GDP Growth
average) (Period end) (as % of GDP) (as % of imports) (USD bn)
FY13 9.7 3.9% 7.4% 9.0% 1.1% 28.7% 6.01

FY14 11.7 3.6% 8.6% 10.0% 1.3% 31.9% 9.10
FY15 11.7 3.8% 4.6% 7.0% 1.0% 37.3% 13.53
FY16 11.0 4.1% 2.9% 5.8% 1.7% 39.7% 18.14
FY17 11.6 4.6% 4.2% 5.8% 4.1% 33.0% 16.14
FY18 11.2 6.1% 4.7% 6.5% 6.3% 29.3% 9.77
FY19 8.4 3.1% 6.8% 12.3% 4.9% 34.6% 7.29
FY20 8.2 -0.9% 10.8% 7.0% 1.5% 44.1% 12.13
FY21 7.1 5.8% 8.9% 7.0% 0.8% 46.9% 17.30
FY22 4.7 6.2% 12.2% 13.8% 4.7% 37.0% 9.81
FY23 4.0 -0.2% 29.0% 22.0% 1.0% 44.6% 4.45
FY24 4.8 2.5% 23.4% 20.5% 0.5% 47.5% 9.39
FY25e 5.3 2.4% 7.5% 12.0% 0.3% 49.4% 13.17
Source (s): MoF, PBS, SBP, AHL Research

2025
Domestic liquidity Exhibit: KSEALL Ownership

Domestic liquidity always plays a crucial role in determining the momentum of the KSE ALL Ownership
market. KSE ownership has already witnessed an astonishing shift and now free float is
2017 2024
predominantly (75.8%) held by High Net worth Individuals (HNWIs), companies, brokers,
Mutual Funds 12.0% 7.5%
and other entities.
Banks 7.7% 6.2%
In addition to this, Pakistan's mutual fund industry's assets under management (AUM) State Life Insurance
4.2% 6.0%
grew from PKR 0.7trn in FY20 to nearly PKR 3trn by Sep’24, out of which only ~8.4% or (SLIC)*
PKR 256bn are equity asset under management (AUMs). Recently, with the declining Insurance (ex. SLIC) 4.0% 1.3%
interest rates and improved macros, we have witnessed net inflow from the mutual fund Foreign 28.7% 3.2%
industry in CY24TD amounting to PKR 34bn which is highest net inflow after 7 years. Other** 43.5% 75.8%
Also, it’s important to mention that during last couple of years, the local corporates have Source (s): MUFAP, FMR, Company Financials, AHL
Research, *State Life Insurance, **Others include; Individuals,
bought shares amounting to PKR 44.9bn via buy backs. Companies, NBFCs, Other Organizations, and Brokers.
We present a detailed liquidity sensitivity analysis, focusing on the anticipated influx of

liquidity into the market. We highlighted this trigger in our previous year’s strategy, ▪ KSE ownership has shifted significantly,
forecasting substantial inflows driven by the expanding scale of the mutual fund industry. with 76.4% of the free float now held by
HNWIs, companies, brokers, and other
Our estimation suggests that with every 1% reallocation from fixed income to equities, entities.
mutual funds and insurance companies could potentially deploy PKR 27.3bn and PKR ▪ A 1% reallocation to equities from fixed
15.4bn, respectively, into the market. Please refer to the accompanying table below for income could lead mutual funds and
a comprehensive overview of the sensitivity analysis. insurance companies to deploy PKR 29.8bn
and PKR 15.0bn, respectively.
Exhibit: Sensitivity of additional funds allocation in equities
Additional
(PKR bn) Current 1.0% 3.0% 5.0%
Mutual Funds 251.3 27.3 81.8 136.4
Equity AUMs % 8.4% 9.4% 11.2% 13.0%
State Life Insurance Corporation (SLIC) 201.7 12.2 36.5 60.8
Equity AUMs % 14.2% 15.1% 16.8% 18.5%
Insurance (Ex. SLIC) 43.7 3.2 9.7 16.2
Equity AUMs % 11.9% 12.8% 14.5% 16.3%
Total 496.6 42.7 128.0 213.4
% of FF Mkt Cap 14.8% 1.3% 3.8% 6.4%
Source (s): MUFAP, FMR, Company Financials, AHL Research

2025
Valuations are still compelling

The KSE-100 2025 forward PE ratio of 5.3x is still substantially below the 10-year
average P/E of 8.3x. This discount signals a sharp undervaluation of the index, ▪ The KSE-100's 2025 forward P/E ratio of 5.3x
suggesting that the market has 57% room to appreciate to 148k points as it aligns closer is well below the 10-year average of 8.3x
to historical valuation multiples.
▪ The market cap to GDP ratio has dropped to
11.0%, indicating a potential 52% upside
In addition, the market cap to GDP ratio, a key metric reflecting the equity market’s size
relative to the economy, is currently at 11.0%. This is well below the 16.9% average for
the last ten years. A normalization of this ratio would imply 52% upside for the KSE-100
index to 143k points.
Figure: KSE-100 historical P/E Figure: Historical trend of market cap to GDP
KSE100 PE 10Y Average Mkt Cap to GDP 10Y Avg. 15Y Avg.
16 40%
14
33%
12
10
10Y Avg. PE: 8.3x 26%
8
15-Yr Avg
6 19%
4 10 - Yr Avg 16.9%
12%
2
- 5%
Jul-16
Jul-21
Nov-24
Nov-14
Dec-16
Jan-19
Jun-19
Nov-19
Dec-21
Jan-24
Jun-24
Apr-15
Sep-15
May-17
Oct-17
Aug-18
Apr-20
Sep-20
Oct-22
Feb-16
Mar-18
Feb-21
May-22
Aug-23
Mar-23
Jun-01
Jun-02
Jun-03
Jun-04
Jun-05
Jun-06
Jun-07
Jun-08
Jun-09
Jun-10
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Jun-17
Jun-18
Jun-19
Jun-20
Jun-21
Jun-22
Jun-23
Jun-24
Nov-24
Source (s): Bloomberg, PSX, AHL Research Source (s): Bloomberg, PBS, AHL Research

2025
Ready to garner foreign interest Exhibit: Foreigners Portfolio Investment*
The strong returns (50.8% CY24TD) in 2024 highlight the role of compelling valuations Com pany Shares (m n) PKR m n USD m n
and ample domestic liquidity, enabling local investors to absorb the impact of foreign
UBL 38.40 10,337 37.20
selling amounting to USD 35.7mn. Our data suggest that foreign holdings in the KSE-
LUCK 7.13 6,074 21.86
All shares have significantly decreased to 3.2% of free float market cap as compared
HBL 41.20 4,320 15.55
to 28.7% back in 2017. In 2024, major events including liquidation of the BlackRock
Pakistan ETF (USD 30mn outflow) and FTSE-related selling by Vanguard (~USD OGDC 42.18 8,024 28.88
100mn) has been easily absorbed by the market. After incorporating these, we estimate HUBC 47.36 2,556 9.20
that current foreign holdings now stand at approximately USD 388mn, representing ENGRO 16.94 3,088 11.11
3.2% of the free-float market capitalization. PPL 74.07 8,976 32.30
Looking ahead, Pakistan stands to benefit from potential reclassification changes within FFC 30.63 3,901 14.04
the MSCI Frontier Markets index. Vietnam, which currently holds a significant weight of NBP 101.83 6,216 22.37
around 30%, is expected to migrate to Emerging Market, redistributing its weight across EFERT 22.17 3,744 13.47
remaining FM constituents. The weight of Pakistan can potentially increase from the PSO 17.80 2,123 7.64
current level (~4.5%), positioning well to attract incremental foreign flows. BAFL 8.88 596 2.14
POL 6.35 2,034 7.32
Exhibit: Net Foreign Portfolio Investment
SEARL 5.38 452 1.63
(USD mn) Net FIPI LOTCHEM 1.28 22 0.08
200.00 Others 45,340 163.18
73.51 Total Portfolio Investm ent 107,804 387.98

100.00
-
* @market price
CY20 CY21 CY22 CY23 CY24TD
(100.00) (48.09)
(35.71)
(200.00)
(300.00)
(400.00) (359.04)
(500.00)
(600.00)
(571.50)
(700.00)
Source (s): NCCPL, AHL Research

2025
M&As to unlock valuation potential

Contrary to the narrative of foreign investment exiting Pakistan, the country’s FDI is ▪ The country is seeing strategic shifts in FDI,
evolving with strategic shifts rather than a withdrawal. Over the past 18 months, while 11 with 16 new international firms entering key
sectors.
foreign companies have exited or announced intentions to divest from Pakistan, this has
been more than offset by the entry of ~16 new international firms, actively acquiring ▪ M&A activity is expected to unlock value,
enhance key sectors, and support market re-
stakes and establishing partnerships in key sectors. These incoming firms are bringing
rating.
fresh capital, technology, and expertise, which speaks to a continued and even renewed
confidence in Pakistan's economic potential despite global and local challenges.
These M&A transactions are expected to unlock significant value within the local stock
market, enhancing the attractiveness of key sector / stocks and supporting a broader
market re-rating. These M&As activities can drive operational efficiencies and growth in
targeted companies, thereby improving market perceptions, valuation metrics and
contribute to a re-rating of the overall market, aligning valuations more closely with
underlying growth potential.
Exhibit: Acquisition filed by companies since Jan'23
Origin of Origin of Transaction

Target Company Seller Acquirer Interest Status
Seller Acquirer size
(PKR bn)
Foreign to Foreign
Total PARCO Pakistan Ltd Total Energies France Gunvor Group Ltd. Switzerland 50% Pending n/a
Wafi Energy Holding
Shell Pakistan Shell Petroleum Company UK Saudi Arabia 78% Complete 20
Ltd.
Telenor Pakistan Telenor Group Norway Etisalat / PTC UAE / Pakistan 100% Pending 108
Orion Towers Telenor Group Norway Etisalat / PTC UAE / Pakistan 100% Pending
Cayman Coca-Cola Içecek
Coca-Cola (Pakistan) Atlantic Industries Turkey 50% Complete 83
Islands (Turkiye)
Diamond Gas International
Tabeer Energy Pvt Ltd Japan Bison Energy FZCO UAE 100% Pending n/a
Japan Co. Ltd.
SadaPay Pvt Ltd SadaPay Technologies Ltd. UAE PPR Holding A.S Turkey 100% Complete n/a
Ontex Pakistan Pvt Ltd Ontex Group NV Belgium Asaia Holding FZ UAE 100% Complete n/a
Advans Pakistan Microfinance
Advans S.A SICAR Luxembourg MNT Halan Pak B.V Egypt/Netherlands 100% Complete n/a
Bank Ltd
Foreign to Local
Assets of six products of Pfizer Lucky Core Industries
Pfizer Pakistan Ltd USA Pakistan 100% Complete n/a
Pakistan Ltd Ltd.
Nimar Industrial
SafeGuard Soap business Procter & Gamble USA Pakistan 100% Complete n/a
Chemicals Ltd.
Assets of Bayer Pakistan Pvt
Bayer AG Germany OBS Pakistan Pakistan 100% Complete 7
Ltd
Local to Foreign
Gas and Oil Pakistan Ltd Gas and Oil Pakistan Ltd Pakistan Saudi Aramco Saudi Arabia 40% Complete 22
New Future Consumer
ZIL Ltd. ZIL Ltd. Pakistan UAE 85% Complete 2
International
Juniper International FZ
Reon Energy Ltd Dawood Lawrencepur Ltd Pakistan UAE 100% Complete n/a
LLC
Wilmar Pakistan
Unity Foods Ltd. Unity Foods Pakistan Singapore/Pakistan 6% Complete n/a
Holdings
Gamalux Oleochemicals Ltd Shareholders Pakistan SNA Equity SDN BHD Malaysia 51% Complete 1
Alif Innovations Shareholders Pakistan Alif Holdings UK 100% Complete n/a
Tez Financial Services Ltd Shareholders Pakistan OrientSwiss S.A Switzerland 100% Complete n/a
Epic Games Scanning
Assets of Quixel Pakistan Ltd. Quixel Pakistan Ltd. Pakistan UK 100% Complete n/a
Service
Eon Onebyte Pvt Ltd Shareholders Pakistan Matrix Analytics Inc USA 100% Complete n/a
Source(s): CCP, AHL Research

2025
FDI – The next big trigger

With the establishment of the Special Investment Facilitation Council (SIFC), Pakistan is
strategically positioning itself as an attractive destination for foreign investment. The
▪ The SIFC has attracted international
SIFC aims to streamline investment processes, reduce bureaucratic hurdles, and create interest, particularly in high-growth
a more business-friendly environment, signaling to global investors that Pakistan is sectors like mining, agriculture, IT, and
energy.
committed to economic reform and sustainable growth. This improved framework has
already begun to capture the interest of international companies, particularly in high- ▪ As macroeconomic conditions stabilize
and policy reforms take effect, Pakistan
growth sectors such as mining, agriculture, information technology and energy industries
is set to experience a steady increase in
which are critical for export led long-term development of the country. FDI inflows.
As macroeconomic conditions stabilize and policy reforms take root, Pakistan is poised
for a steady increase in FDI inflows. These investments are expected not only to inject
capital but also to bring in advanced technology and expertise, bolstering export
potential, industrial capacity and creating jobs. The anticipated rise in foreign investment
will strengthen economic resilience specially on the balance of payment front, enhance
sectoral productivity, and help the country meet its sustainable growth objectives in the
coming years.
Exhibit: Projects offered under SIFC

Energy Sector: Mines and Minerals:
1320 MW Thar Coal Based Power Copper Gold Expl. & Min. in Chagai Baluchistan
1000 MWH Battery Energy Storage System Lead-Zine Expl. & Min. in Khuzdar Baluchistan
132 MW Rajdhani Hydropower Mineral Development Framework - Chagai
2000 MVAR Reactive Compensation Integrated soda ash manufacturing plant
4500 MW Diamer Basha Dam Thar Coalfield
Solar PV Prospect of Metallic Minerals in Gilgit-Baltistan
Transmission Lines Metallic Minerals Expl. in KPK
Greenfield Refinery Coal Gasification & Liquefaction at Thar Coalfield
Strategic Gas Pipeline Assembling Plant for mining machinery
Information Technology: Agriculture:
Setup of Technology Zones Corporate Farming in Cholistan
Investment in Telecom Infrastructure Deployment Corporate Dairy Farm Establishment
Cloud Infrastructure Establishment Corporate Feedlot Farm Establishment
Investment in Manufacturing of Smart Devices Corporate Camel Farm Establishment
Global Skills Hub/Integrated Delivery Center
Source (s): SIFC Website, AHL Research

2025
Equities – the preferred asset class

We believe that a key driver for the re-rating of the KSE100 index in 2025 will be the
growing preference for equities as the primary asset class. We expect fixed-income
▪ The re-rating of the KSE100 index in 2025
returns to remain in single digit (after-tax) territory next year, reducing its attractiveness will be driven by a growing preference for
relatively. equities.
Additionally, the outlook for real estate as an investment avenue remains subdued, with ▪ Fixed-income returns are projected to
remain in single digits
rising costs and regulatory hurdles dampening its appeal. Stringent measures to combat
dollarization, coupled with a stable balance of payments outlook, are expected to limit
investment in foreign currency, further curbing investment in dollar-denominated assets.
Furthermore, the previously attractive auto sector as an investment class has also lost
its attraction amid lower purchasing power and higher car price and is unlikely to recover
in the near term.
This combination of factors creates an ideal environment for equities to outperform,

positioning them as the preferred investment class in 2025.
Historically, equities have consistently outperformed other asset classes over the mid to
long term, driven by their potential for higher capital appreciation and the ability to
generate sustainable returns through dividends and growth. We have summarized the
table below, which highlights the performance of equities relative to other asset classes
demonstrating outperformance in all tenures.
Exhibit: Pakistan equities vs. other asset classes

Bank
Year KSE100* Gold T-Bills DSC* USD PKR PIBs
Deposits
CY24TD 58.39% 24.72% 21.44% 13.88% 17.68% -1.42% 12.10%
5Y CAGR 28.38% 11.37% 13.90% 11.74% 10.40% 12.76% 12.45%
10Y CAGR 19.41% 8.03% 11.17% 10.26% 8.13% 10.85% 11.25%
15Y CAGR 24.27% 5.90% 11.09% 10.84% 8.00% 8.35% 11.64%
20 CAGR 21.95% 9.31% 10.98% 10.83% 7.38% 8.07% 11.71%
Source (s): SBP, Bloomberg, PSX, AHL Research, *Total return

2025
Increasing investor confidence

Investor confidence in Pakistan has shown significant improvement, reflecting positive
sentiment in the market. The Business Confidence Index (BCI) has risen to 54.3, a ▪ The BCI has risen to 54.3, up from 39.2 in
significant increase from 39.2 in Sep’23, indicating a stronger outlook from businesses Sep’23
on the economic environment. This surge in confidence is driven by various factors, ▪ CDS has declined to 1496 bps, reflecting a
including improved macroeconomic stability and optimism surrounding fiscal reforms. reduction in perceived sovereign risk.
Additionally, Pakistan's Credit Default Swap (CDS) has experienced a significant

decline, currently standing at 1,496, compared to 4,740 in the same period last year and
a peak of 12,388 in Nov’22. This sharp decline in the CDS reflects a reduction in
perceived sovereign risk, signaling growing investor confidence in Pakistan's ability to
meet its debt obligations. Collectively, these indicators point to a more favorable
investment climate, fostering optimism about the country's economic trajectory.
Exhibit: Trend of business confidence survey
60.0
55.0
50.0
45.0
40.0
35.0
Jan-24
Mar-24
Jun-24
Jul-24
Nov-23
Dec-23
Feb-24
Sep-24
Sep-23
Aug-24
Oct-23
Apr-24
May-24
Oct-24

2025
Capital raising during CY24

The IPO market in Pakistan has seen a major revival in CY24, on the back of by economic
growth and an unprecedented performance by the stock market. A total of five (5) IPO
transactions in the main board and two (2) in the GEM have been concluded in 2024, as
compared to only one (1) transaction in 2023. During the year, main board welcomed new
listings such as SLGL, TPLRF1, IPAK, FCL and BFBIO. Whereas, GEMMEL and
GEMBCEM has been added on the GEM board. Total demand for IPOs in 2024 amounted
to PKR 13.0bn, with PKR 8.4bn raised.
Exhibit: Equity Capital Raising (IPO) CY24

Company Amount (PKR mn)
Main Board
Secure Logistics Group Ltd. 600
TPL REIT Fund - I (Offer for Sale) 589
International Packaging Films Ltd. 1,767
Fast Cables Ltd. 3,130
BF Biosciences Ltd. 1,925
Subtotal 8,010
GEM Board
Mughal Energy Ltd. 325
Burj Clean Energy Modaraba 100
Subtotal 425
Total Capital Raising (IPO) 8,435
Source (s): PSX, AHL Research
Capital raising through the right issue

A total of ten companies issued right shares in 2024, raising PKR 18.3bn as compare to
PKR 6.8bn in 2023, showcasing a consistent demand for capital expansion across various
sectors.
Exhibit: Equity Capital Raising (Right Issue) in CY24
Company Amount (PKR mn)
The Pakistan General Insurance Co. Ltd. 36
Tariq Corporation Ltd. 199
Gatron (Industries) Ltd. 5,600
Mirpurkhas Sugar Mills Ltd. 500
Image Pakistan Ltd. 987
KSB Pumps Company Ltd. 1,947
Allawasaya Tex. & Finishing Mills Ltd 200
Faran Sugar 551
Bawany Air Products 6,000
Stylers International 2,329
Total 18,349
Source (s): PSX, AHL Research
Outlook for IPOs in 2025

In the year 2025, as anticipated monetary easing and improved valuation multiples come
into play, we foresee a surge in IPO activity in 2025. We expect the launch of ~7-8 new
IPOs in sectors such as Auto Parts, Retail, Technology, Consumer, and Data/AI with an
estimated capital raising of approximately PKR 8-10bn.

2025
KSE100 Event Graph
KSE Volume KSE 100 Index Govt approves (mn Shares)

termination of existing
Power Purchase
96,000 Agreements with IPPs 1,000
under 1994 power policy
Donal Trump
wins US
92,000 Presidential
Elections
Saudi Delegation
visit for USD 2bn
88,000 investment talks 800
Uncertainty over the
settlement of Chinese IPPs SBP cut
dues policy rate by
FFC and FFBL
announces to evaluate 250bps to
84,000 potential merger 15.0%
UAE pledges
USD10Bn investment
National Assembly
80,000 IMF’s mandates passes 26th 600
removal of Constitutional
subsidies for new Amendment Bill
program
Supreme Court
76,000 Approval of PIA’s Rs268 verdict to allot
billion debt restructuring reserved seats to PTI
OGDC and PPL
Anticipation of Tension in reported stellar
MiddleEast
72,000 imposition of hefty improvement in 400
capital gain and collection from gas
Uncertainty over dividend tax sales, curtailing
the result circular debt
Asif Zardari Policy rate cut by SBP
General
sworn in as PM visit to KSA, by 150bps
Elections 2024.
68,000 President of focusing on potential
Pakistan USD 1bn Saudi Reko
Diq deal
SLA with IMF
for 3rd SBA
64,000 200
Shahbaz Sharif elected Post Federal Budget
as Prime Minister of FY25 Rally
Approval of 2nd Stand- Pakistan
by arrangement tranche
60,000 of USD 700mn by the Announcement of a
IMF's Executive Board coalition government
by major political
parties
56,000 -
Apr-24
Oct-24
Jan-24
Jun-24
Mar-24
Feb-24
Nov-24
Aug-24
Sep-24
May-24
Jul-24
Arif Habib Limited 17 45

2025
Event to watch out in 2025

Table: Key Events to watch out for during 2025
Lucky motors to launch Peugeot 3008 Nov-24 Monetary policy meeting May-25
Changan to launch its electric vehicle named Changan Lumin Nov-24 USD 126mn repayment to IMF May-25
MG5 to be launched Nov-24 Monetary policy meeting Jun-25
MG Cyberster to be launched. Nov-24 Federal Budget 2025-2026 Jun-25
Prime minister to visit cop29 event in Azerbaijan Nov-24 USD 155mn repayment to IMF Jun-25
MSCI Quarterly Review Nov-24 Electricity base tariff hike expected Jul-25
USD 157mn repayment to IMF Nov-24 Saudi Arabia debt of PKR 2bn to be rolled over Jul-25
Monetary policy meeting Dec-24 USD 79mn repayment to IMF Jul-25
MG Marvel R and MG GT to launch Dec-24 Base power tariff revision Jul-25

Completion of debottlenecking of pipelines under phase 1 of PEF
Dec-24 Monetary policy meeting Aug-25
project
USD 243mn repayment to IMF Dec-24 MSCI Quarterly Review Aug-25
The Shah Taj Sugar Mills Project, a 32 MW bagasse-based plant
Dec-24 OGDC's Dakhni Compression Project to complete Aug-25
to complete
Conclusion of Reko Diq's feasibility study Dec-24 USD 141mn repayment to IMF Aug-25
Completion of FFC & FFBL merger Dec-24 Monetary policy meeting Sep-25
Unwinding of production cut by OPEC Jan-25 2nd Review of IMF's EFF Program Sep-25
Completion of pipeline to connect MARI's field Shewa to gas
Jan-25 USD 126mn repayment to IMF Sep-25
network
Pakistan Govt international bond of USD 500mn to
Rollover of USD 3bn UAE deposits Jan-25 Sep-25
mature
Disbursement of USD 1.3bn by IMF post conclusion of
USD 246mn repayment to IMF Jan-25 Oct-25
2nd review
Executive Board approval of IMF's third tranche of EFF

Monetary policy meeting Feb-25 Oct-25
program
EPCL's Hydrogen Peroxide plant to reach completion Feb-25 OGDC's Uch development Project to complete Oct-25
Zorlu Solar Pakistan Ltd's 100 MW solar project to
MSCI Quarterly Review Feb-25 Oct-25
complete
USD 154mn repayment to IMF Feb-25 Monetary policy meeting Nov-25
Monetary policy meeting Mar-25 Saudi Arabia debt of PKR 3bn to be rolled over Nov-25
1st Review of IMF's EFF Program Mar-25 MSCI Quarterly Review Nov-25
Rollover of USD 2bn of Chinese debt Mar-25 OPEC + increases production by 2.2mnb/d Nov-25
Sale of thermal asset of ENGRO concludes Mar-25 USD 138mn repayment to IMF Nov-25
USD 127mn repayment to IMF Mar-25 Monetary policy meeting Dec-25

MARI’s pressure enhancement projects’ phase 2 to
OPEC+'s 2nd phase of oil production extension Jan-25 Dec-25
complete
Disbursement of USD 1.3bn by IMF post conclusion of 1st review Apr-25 USD 115mn repayment to IMF Dec-25
USD 168mn repayment to IMF Apr-25 TAY Powergen's 30 MW bagasse project to complete Dec-25
CIHC Pak Power Co.'s 300 MW coal-based plant in
MSCI Quarterly Review May-25 Dec-25
Gwadar to complete
Source (s): AHL Research

2025
Pakistan Capital Market

Sector-wise top picks
E&Ps Banks
FABL | NBP
OGDC | PPL
Subdued interest rates to
100% recovery of suppress earnings, but
receivables which has banks to focus on
raised prospects of high volumetric growth to
dividends ensure profitability
Fertilizer Cement
FFC FCCL | LUCK | MLCF
Stable offtake and Margins to remain
margins. elevated due to better
power mix and low coal
prices
Technology Auto
SYS | AIRLINK INDU
Focus towards Demand to recover
sustainable and long-term following economic
growth will boost stability and lower interest
technology services rates, with EVs to gain
exports prominence.
Textile OGMC’s
ILP PSO
Global recovery to drive Revival of economic
demand, however higher growth and higher
taxes to hurt profitability automobile sales to drive
demand

2025
Commercial Banks
Strong Balance Sheets
navigating headwinds

2025
Banking on resilience
Testing times: As banks grapple with the ripple effects of lower interest rates and
looming ADR related tax obligations, the outlook for Pakistan’s banking sector in CY25f
seems challenging. The SBP eased its policy stance in Jun’24, reducing the policy rate
by a cumulative 700bps throughout CY24TD, putting pressure on rupee-lending rates in
the second half of the year. Subsequently, the weighted average lending rate on new
loans fell to 18.42% by Sep’24, down from 20.25% in Sep’23, while the average deposit
rate decreased to 9.53% from 11.2%. Despite these pressures, the sector’s profitability
gained momentum in 3QCY24, bolstered by lower interest expenses and significant
capital gains. Management indicators, particularly the cost-to-income ratio,
demonstrated upward trends, rising to 42.4% as of 9MCY24 compared to 41.8% in the
previous year, supported by higher operational costs due to inflationary pressures. As
we look to CY25, maintaining profitability will be an uphill task. The cost-to-income ratio
is expected to stabilize around 40%, with inflation forecasted to remain low at 8.6%, down
from an estimated 13.3% in CY24e. However, total income growth could be restricted by
lower interest rates, which are anticipated to average 12.1% in CY25f against 19.4% in
CY24e. Additionally, incremental tax liabilities could arise for banks failing to meet the
50% ADR threshold, further weighing on sector profitability.
Deposit growth driven by expanding money supply: Driven by an era of record-high

interest rates at 22%, funds surged into Pakistan’s banking system, powering an
impressive 19.1% YoY increase in deposits by 3QCY24. This momentum was further
amplified by an expanding money supply (M2), with broad money climbing 8.8%
CY24TD. Additionally, the proportion of Currency in Circulation within M2 decelerated to
around 25%, down from a typical 30% over the past five years. This monetary expansion
significantly boosted deposit growth across the sector, spurred by a substantial rise in
government borrowings for budgetary support, which rose 12.1% CYTD. However, as
for CY25f, deposit growth is expected to moderate alongside a more tempered M2
expansion. Rate cuts likely to strain deposit rates, while ADR-linked tax obligations could
shift banks' lending priorities toward the private sector. Our forecast for CY25f sector
deposit growth stands at 12%, aligning with this adjusted outlook.
Strengthened coverage ratios: In a proactive move to safeguard against potential

losses, banks had bolstered their coverage ratios by booking considerable provisioning.
As of Sep’24, the average coverage ratio across the banking sector stands at ~112.8%,
an increase from ~98.4% in Dec’23. However, the infection ratio has crept up to 6.8%,
rising from 6.3% in Dec’23. Looking ahead, we anticipate a slight rise in NPLs across the
board, projecting a YoY increase of +1.2% for the AHL universe. On the other hand, we
expect provisioning expenses to decrease significantly, -5.3% YoY for the AHL universe,
as this decline is influenced by a high base effect from the provisioning booked this year.
Robust CAR and dividend growth signal sector stability: Capital adequacy ratio
(CAR) for KSE-100 banking sector remains robust at 21.6%, compared to 18.5% in the
same period last year, comfortably above the regulatory requirement of 11.5%. The
slowdown in credit growth, coupled with increased investments in risk-free debt
instruments, has contributed to a controlled expansion of risk-weighted assets. With
strong balance sheets supporting their positions, banks have rewarded shareholders
with substantial dividends, totaling PKR 191bn in 9MCY24, representing an impressive
25% increase YoY. Going forward, we anticipate that banks will maintain attractive
payout ratios to keep investors engaged.

2025
Key risks
▪ Continued reduction in interest rates could compress lending margins, impacting
profitability.
▪ Persistent low economic demand could diminish business volumes and overall banking
transactions, limiting lending opportunities and potentially resulting in incremental taxes
related to the ADR threshold.
▪ Anticipated growth in NPLs due to slow loan growth and economic conditions may strain
banks' balance sheets.
▪ While the cost-to-income ratio is expected to improve, maintaining efficiency amidst
declining income could pose challenges.
Figure: ADR vs Gross Advances Figure: Investment to Deposits ratio
(PKR trn) Advances ADR (RHS) (PKR trn) Investments IDR (RHS)
13 60% 34 102%
12 55% 29 90%
10 50% 24 78%
9 45% 19 66%
7 40% 14 54%
6 35% 9 42%
4 30% 4 30%
Dec-19 Dec-20 Dec-21 Dec-22 Dec-23 Sep-24 Dec-19 Dec-20 Dec-21 Dec-22 Dec-23 Sep-24
Figure: Deposit growth remains high in CY24 Figure: Spreads decline post rate cuts
(PKR trn) Deposit Deposit Growth (YoY) (RHS) Deposit Rate Lending Rate Spreads (RHS)
32 25% 24% 11%
31 23%
20% 11%
30 22%
16% 10%
29 21%
28 20% 12% 10%
27 19%
8% 9%
26 17%
25 16% 4% 9%
24 15%
0% 8%
Jul-24
Jul-23
Jan-24
Jun-24
Aug-23
Sep-23
Aug-24
Sep-24
Oct-23
Nov-23
Dec-23
Feb-24
Mar-24
Apr-24
May-24
Jul-23
Jul-24
Nov-23
Dec-23
Jan-24
Jun-24
Aug-23
Sep-23
Aug-24
Sep-24
Oct-23
Feb-24
Mar-24
Apr-24
May-24

2025
National Bank of Pakistan (NBP) NBP

High dividend potential to attract investors attention Summary Data
Target Price (Dec'25) 89.3
Our investment thesis on National Bank of Pakistan (NBP) hinges on four key Last Closing 61.1
factors: (i) resolution of the pension fund case, (ii) robust capital adequacy Upside (%) 46.3
supporting dividend growth, (iii) strategic balance sheet expansion that drives Shares (mn) 2,127.5
earnings growth while preserving asset quality, and (iv) compelling valuations at Free float (%) 24
current levels. In 9MCY24, NBP's earnings reflected mainly two critical elements Market Cap. (PKR mn) 129,885
pensions and provisioning. Pension-related expenses weighed on profitability, but Market Cap. (USD mn) 468
substantial 68% YoY decline in provisioning charge strengthened the bottom line. It
is essential to note that the pension-related impact on earnings was one-off in 2024, Recommendation BUY
and going forward earnings are expected to grow at a 3-year CAGR of 26%. Price Performance
3M 6M 12M
Pension resolution clears path for earnings growth
Return (%) 39.2 50.3 149.1
The long-standing pension liability has been addressed, with NBP booking an
extraordinary expense of PKR 49bn in 9MCY24, a post-tax impact of PKR Avg. Volume (000) 4,539 5,289 4,571
12.0/share. This settlement figure, lower than the initially estimated PKR 60bn, will ADTV (mn) - PKR 271 269 204
help lift the burden on NBP's balance sheet, paving the way for growth. While this ADTV (000) - USD 976 967 732
one-off expense impacts CY24 earnings, the outlook beyond CY24 is robust, with High Price - PKR 69.9 69.9 69.9
projected earnings growth of 26% CAGR over the next three years. Low Price - PKR 43.7 34.9 24.5
Strong capitalization underpins dividend resumption

Since suspending dividends in 2016 amid the prolonged pension case, NBP has Shareholding Pattern
significantly strengthened its capital adequacy ratios. As of 3QCY24, the bank’s total Public Others,
Sector 6%
CAR and Tier-1 CAR stand at 24.6% and 18.3%, respectively, compared to 16.5%
Cos. &
and 12.3% in CY16, substantially above the regulatory minimums of 14% and Corp., 5%
10.5%, even with NBP’s reduced additional capital requirement (from 2.5% to 1.5%). Individuals,
With prudent provisioning for the pension liability, we anticipate a much-awaited 6%
return to dividend payments. Our base case forecasts a 50% payout in CY24 and
CY25, equating to PKR 3.0/share in CY24e, while PKR 9.0/share in CY25f. Post Foreign
CY25f, we project NBP to revert to its historical 70% payout ratio, positioning it as Cos., 7% M/S. State
one of the highest-yield dividend stocks in the sector (CY25f DY: 15%; CY26f: 18%). Bank of
Pakistan,
Valuations reflect deep discount to peers 75%
NBP currently trades at a substantial discount relative to its private sector peers, Source: Company Financials, AHL Research
with a CY25f P/B of 0.31x and a P/E of 3.3x, well below the industry averages of
0.8x P/B and 3.74x P/E. NBP's transformation is underway, leveraging a strong Relative Performance
capital position, distinctive fee-based income streams, and improved coverage ratio.
300% NBP KSE100
We believe these factors will help unlock the bank's earnings potential. NBP remains
an attractive proposition in our view, with favorable P/B multiples and a strong 270%
dividend outlook placing it among the highest-yielding stocks in the banking sector. 240%
210%
180%
150%
120%
90%
Jan-24
Jun-24
May-24
Mar-24
Feb-24
Apr-24
Oct-24
Jul-24
Nov-23
Dec-23
Nov-24
Sep-24
Aug-24
Source: Bloomberg, AHL Research

2025
Exhibit: Ratio Analysis
CY24e CY25f CY26f
Earnings per share PKR 5.24 18.56 22.22
Dividend per share PKR 3.00 9.00 11.00
Book value per share PKR 187.53 195.66 205.51
Price to Earning x 11.64 3.29 2.75
Price to Book x 0.33 0.31 0.30
ADR % 27.33 31.57 31.06
IDR % 120.05 120.11 120.03
NIMs % 2.27 2.44 2.81
RoE % 2.80 9.69 11.08
Table: Key Financial Highlights

PKR mn CY24e CY25f CY26f
Income Statement
Net Mark-up Income 138,986 149,095 180,076
Non-Mark-up Income 51,378 74,371 75,922
Total Income 190,364 223,466 255,998
Provisioning 2,576 8,446 7,619
OPEX 113,425 116,479 132,542
Post Tax Profit 11,158 39,487 47,264
Balance Sheet
Advances 1,098,408 1,210,663 1,334,226
Deposits 4,019,780 3,835,168 4,295,388
Investments 4,825,859 4,606,546 5,155,674
Borrowings 2,383,280 2,273,825 2,546,684
Total Equity 401,105 418,393 439,356
Figure: Improving profitability and RoE Figure: Resumption of payout on the cards
PAT Return on equity (RHS) (PKR) DPS Payout ratio (RHS)

(PKR bn)
12.0 60%
56 16%
48 14% 10.0 50%
40 12% 40%
8.0
32 10% 30%
6.0
24 8% 20%
4.0
16 6% 10%
8 4% 2.0 0%
- 2% - -10%
CY21a CY22a CY23a CY24e CY25f CY26f CY21a CY22a CY23a CY24e CY25f CY26f
Source (s): Company Financials, AHL Research Source (s): Company Financials, AHL Research

2025
Faysal Bank Limited (FABL) FABL

Summary Data
Picking up the pace in the Islamic league
FABL, after exemplary conversion form conventional to Islamic, now stands as the Last Closing 48.1
second-largest Islamic bank in the country, FABL is strategically positioned with a Upside (%) 58.8
network of 765 branches across 308 cities. With a resilient capital structure, low Shares (mn) 1,517.7
infection ratio, and high coverage metrics, FABL is well-equipped to continue Free float (%) 25
excelling in the Islamic banking sphere, marking it as a prime choice within AHL’s Market Cap. (PKR mn) 73,001
banking coverage. Market Cap. (USD mn) 263
Exceptional top-line growth Recommendation BUY

FABL’s transition to Islamic banking has exempted it from the Minimum Deposit Rate Price Performance
(MDR) requirement, a regulatory advantage that has significantly contributed to 3M 6M 12M
earnings growth. By the end of 9MCY24, FABL reported a stellar 22% YoY growth
Return (%) 10.3 31.9 118.5
in net profit earned, primarily fueled by this MDR exemption, expanding current
Avg. Volume (000) 2,002 3,263 2,941
account balances (now 33% of total deposits), and variable Sukuk holdings. Going
ADTV (mn) - PKR 98 160 126
forward, this along with a strong retail presence and aggressive lending history, will
support bank’s interest/profit earning yield. ADTV (000) - USD 354 575 453
High Price - PKR 50.5 53.3 53.3
Strong CASA composition
Low Price - PKR 43.2 36.0 21.4
FABL’s asset base crossed PKR 1.4trn in 9MCY24, driven by effective deposit
mobilization and strategic borrowings. The bank has steadily increased its CASA
Shareholding Pattern
(Current Account and Savings Account) mix, which has now reached 79% as of
Sep’24, up from 76% at Dec’23. With a current cost of deposits at ~11.7%, this Others,
strong CASA ratio places FABL in a favorable position to sustain low funding costs. 8%
Record Performance and Solid Growth Outlook FI's, 3%

FABL’s financial results for CY24e are anticipated to reach new heights, with record
earnings projected at PKR 17.3/share (9MCY24: PKR 13.4 per share) and a Individuals
forecasted dividend payout of PKR 6/share (9MCY24: PKR 4.5 per share). The , 17%
bank’s Capital Adequacy Ratio (CAR) has risen to a solid 21.2% as of Sep’24,
compared to 17.5% at Dec’23, underscoring its financial stability. With this strong Associated
foundation, FABL is well-positioned to enhance shareholder returns through Cos., 72%
potential dividend increases and a strategic focus on expanding its branch network.
Source: Company Financials, AHL Research
Valuations at discount
We value FABL using a Justified P/B ratio methodology, considering our estimated
Relative Performance
average ROE of 19.1% for the period CY25-27. Our analysis yields a justified P/B
multiple of 0.93x. Based on our valuation, our Dec’25 Target Price for FABL is PKR 270% FABL KSE100
76.4/share, implying a potential upside of 58.8% from the last closing price and a 240%
dividend yield of 11% (CY25f). Currently, FABL is trading at a forward P/E ratio of
3.0x in favorable comparison to the current peers' P/E ratio of 3.7x. This 23% 210%
discount makes the stock particularly attractive at its current level, hence we rate 180%
FABL as a "Buy”.
150%
120%
90%
Jan-24
Jun-24
May-24
Mar-24
Feb-24
Apr-24
Oct-24
Jul-24
Nov-23
Dec-23
Nov-24
Aug-24
Sep-24

2025
CY24e CY25f CY26f
ADR % 61.43 61.96 62.49
IDR % 70.36 70.32 70.28
NIMs % 6.56 6.14 5.48
RoE % 26.35 20.78 18.64
Table: Key Financial Highlights

(PKR mn) CY24e CY25f CY26f
Income Statement
Net Mark-up Income 79,845 82,274 82,501
Non-Mark-up Income 17,313 21,120 22,501
Total Income 97,158 103,394 105,002
Provisioning 4,455 3,412 3,886
OPEX 41,310 47,363 47,758
Post Tax Profit 26,210 24,173 24,840
Balance Sheet
Advances 588,277 664,533 750,671
Deposits 957,570 1,072,478 1,201,175
Investments 673,718 754,154 844,242
Borrowings 304,104 344,514 392,050
Total Equity 108,029 124,614 141,865
Figure: Profitability vs RoE Figure: Deposits vs M2 Growth

(PKR bn) PAT Return on equity (RHS) (PKR bn) Deposits M2 Growth
28.0 29%
1,440 19%
24.0 26% 1,260 18%
20.0 23% 1,080 16%

900 15%
16.0 20%
720 14%
12.0 17%
540 12%
8.0 14% 360 11%
4.0 11% 180 9%
- 8% - 8%
CY20a CY21a CY22a CY23a CY24e CY25f CY26f CY20a CY21a CY22a CY23a CY24e CY25f CY26f

2025
Oil & Gas Exploration

Companies
Powering the nation’s energy
needs

2025
International oil
Tug of war in oil prices
In CY24TD, oil prices have been influenced by a blend of supply cuts, economic
slowdown-induced demand fluctuations, and geopolitical tensions that introduced
volatility into the market. Prices of WTI, Brent, and Arab Light declined by 1.2%, 1.8%,
and 2.9%, respectively. The year started with an anticipated recovery in global oil
demand, yet tensions from the Middle East conflict pushed prices upward. High inflation
in major oil-consuming economies brought demand concerns and recession fears into
focus. Additionally, Ukraine's attack on Russian refineries briefly stirred supply disruption
worries in Eastern Europe, and a Gulf Coast hurricane in the U.S. temporarily lifted
prices. In Jun’24, OPEC+ extended its 2.2mn b/d production cuts through Dec’24, with
a phased increase planned through Nov’25. Although these moves, along with the
geopolitical climate, initially supported oil prices, weaker demand from the U.S. and
China ultimately tempered gains.
Demand revival on the horizon

For 2025 the world oil demand is projected to grow by 1.30 mb/d to 104.36 mb/d,
according to EIA. Major contributor for the jump is anticipated to be demand from Asia
(+0.49mb/d YoY), Euroasia (+0.38 mb/d YoY) and Europe (+0.21 mb/d YoY).
Unwinding supply
The non-OPEC oil supply growth for CY25 is project to arrive at 71.94 mb/d, showcasing
a growth of 1.48 mb/d YoY mainly due to growth from OECD countries such USA (+0.45
mb/d) and Canada (+0.25mb/d). Similarly, supply by OPEC is forecasted to augment by
0.55 mb/d to 32.60mb/d in CY25 versus 32.04 mb/d in CY24.
Oil price projection

Going forward, the countries around the globe are expected to witness an economic
revival given the inflation rate is coming down tagged with interest rates easing off.
However, the Middle East conflict is escalating, bringing in Iran (which is one of the key
oil producer) into picture. Moreover, the Ukraine and Russia war is also ongoing, and in
the event of further intensification of the conflict can result in surge in oil prices. Hence,
we expect oil price in FY25 and FY26 to settle at USD 77/bbl and USD 70/bbl.
Figure: Oil demand in relation to oil prices
Oil Demand (RHS) WTI Arab Light Brent

(USD/bbl) (mn b/d)
110 108.0
104.4
100 103.1 105.0
102.2
90 100.8 102.0
100.0 100.1
98.5
80 96.9 97.5 99.0
95.7
70 96.0
60 91.7 93.0
50 90.0
40 87.0
30 84.0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024* 2025*
Source (s): EIA, AHL Research, *estimated

2025
Figure: World oil production in relation to oil price Figure: World oil consumption
OPEC Non-OPEC North America Europe Asia Others

(mn b/d) (USD/bbl) (mn b/d)
120 120 40
35
100 105
30
80 90
25
66 72
60 64 64 64 64 64 75 20
15
40 60
10
20 35 45
29 29 29 29 29 33 5
- 30 -
2019a 2020a 2021a 2022a 2023a 2024e 2025f 2019a 2020a 2021a 2022a 2023a 2024e 2025f
Source (s): EIA, AHL Research Source (s): EIA, AHL Research
Figure: Surplus/(Deficit) Production trend Figure: OPEC production

Arab Light Surplus/ (Deficit) - RHS mn bpd
(USD/bbl)
140 19.0 34
120 34
15.0
33
100
11.0 33
80 32
7.0 32
60
3.0 31
40 31
20 -1.0 30
30
- -5.0
Jul-22
Jul-23
Jul-24
Nov-21
Jan-22
Nov-22
Jan-23
Nov-23
Jan-24
Sep-21
Sep-22
Sep-23
Mar-24
Sep-24
Mar-22
May-22
Mar-23
May-23
May-24
Oct-16
Apr-17
Oct-17
Apr-18
Oct-18
Apr-19
Oct-19
Apr-20
Oct-20
Apr-25
Apr-21
Oct-21
Apr-22
Oct-22
Apr-23
Oct-23
Apr-24
Oct-24
Oct-25
Source (s): EIA, AHL Research Source (s): EIA, AHL Research

2025
Oil Event Graph

Brent
(USD/bbl) Hurricane Hilary Israel strikes in

Israel-Palestine Iran Trump elected as US
and Idalia in War President.
Liyan oil outage
USA
100 Credit Suisse OPEC+
bank collapsed cuts
production
by 2.2mn Concerns on US
OPEC+
b/d inventories
extends
decline
production cut
90 till Nov'24
80 Iran attacks
Israel
Russia cuts
OPEC+ production by
Ukraine attacks
70 announced a 0.3mn b/d
Russian oil Hurricane in
surprise cut of refinery US Gulf of
1.15mn b/d Houthi rebels Mexico
attack
commercial
Saudi Arabia ships at Red China announces
60 Russia plans to cut pledges OPEC+ stimulas package
Sea
0.5mn-0.7mn b/d of oil additional 1mn extends
b/d production
OPEC+ member Air & sea
cut till
extended their strikes by US & OPEC+
Sep'24
cuts and made Russia extends UK on Houthi extends
50 voluntry cuts production cut to target at Red production
with total cut 0.5mn b/d Sea cut till
clocking in at Dec'24
3.66mn b/d
40
Apr-23
Oct-23
Apr-24
Oct-24
Jan-23
Jun-23
Jan-24
Jun-24
Mar-23
Mar-24
Feb-23
Nov-23
Dec-23
Feb-24
Nov-24
Aug-23
Sep-23
Aug-24
Sep-24
May-23
May-24
Jul-23
Jul-24
Arif Habib Limited 48 58
2025
Powering the Nation’s Energy Needs

Exploration targets: The Pakistani E&P companies spud a total of 59 wells, which is
more than the initially planned 56 wells in FY24, which consists of 15 exploratory and
32 development/appraisal wells. The higher numbers of wells were drilled amid ▪ E&P companies plan to spud 67 wells during
the quarter.
improved liquidity of E&P companies due to gas price hike. The drilling efforts resulted ▪ In light of tight gas policy, the E&P companies
in 15 oil & gas discoveries. In FY25, 67 wells (27 exploratory & 40 are actively engaged in planning and
development/appraisal wells) are planned to be spud by E&Ps. assessing prospect.
Curtailment of Pakistan’s oil and gas production: Pakistan’s oil production during
FY24 witnessed an uptick of 1% YoY to settle at 70,524 bopd against 69,513 bopd
during FY23. The jump in oil production is owed to commencement new discoveries Figure: Historical exploration activity
and increase production from matured fields post production enhancement initiatives.
(No.) Wells Spud Discoveries
However, gas production declined by 4% YoY to arrive at 3,116 mmcfd in FY24 vis-à-
vis 3,259 mmcfd in FY23. The decrease in gas production is owed to natural decline at 35
major fields coupled with curtailment by SNGP amid reduction in demand from gas from 30
5
25
industrial sector. In order to address the natural decline, the E&P companies have taken 4 6
20
intervention measures to improve production. 3
15 7 5
25
Govt. introduces Tight Gas policy: In Feb’24, the Govt. introduced the Tight Gas 10 20 20 3
16 13 13
Policy 2024, offering exploration companies a 40% premium over the Petroleum Policy 5 10
2012 price as an incentive to tap into untapped tight gas reserves. The policy also allows -
FY18
FY19
FY20
FY21
FY22
FY23
FY24
for a lease period of up to 30 years, with the option to extend for an additional 10 years.
Following this, E&P companies are now focusing on wells with tight gas potential. In
Apr’24, OGDC announced a tight gas discovery at Nur West-1 with an output of Source (s): PPIS, AHL Research
1.24mmcfd and plans to conduct fracking on 6-7 wells in Sindh. Meanwhile, PPL intends
to appraise four tight gas discoveries Naushahro Firoz, Hadi, Hub, and Morgandh while
MARI is assessing tight gas prospects in the Kawagarh Formation at its Shewa-2
appraisal well.
Drilling at Abu Dhabi Block: In Abu Dhabi’s offshore Block-5, where OGDC, PPL, and
MARI each hold a 25% stake, appraisal wells BuDana-003 and Al Bateen-002 have
reached completion, while drilling on the first exploration well, Marwah (XF003-1V), is
currently underway. Additionally, the appraisal wells BuDana-003, Al Manhal, and Al
Bateen are now undergoing a Pre-FEED study alongside technical and commercial due
diligence. Any major discovery here could potentially deliver a significant boost to
revenue and earnings for the stakeholders involved.
Divestment of Reko Diq Mining Project under consideration: The copper and gold
extraction project at the Reko Diq Mine in Balochistan, where OGDC and PPL each
hold an 8.33% stake, is currently in the feasibility study for the project is ongoing,
expected to conclude by the end of 2024. Following this, construction will begin, with
mining operations anticipated to commence in 2028. Additionally, OGDC and PPL are
considering divesting a portion of their stake in the project to a sovereign foreign
investor.
Risk (s):
▪ Disruption of production from major fields.

▪ Hefty drop in oil prices or sharp appreciation of PKR/USD
▪ Inability to bring discovery online since a long time.

2025
Oil Price Sensitivity
Case-1: Oil Prices Assumption (USD/bbl) and Fair Values

TP EPS (PKR) DPS (PKR) P/E (x) DY (%)
Code Current Price Upside (%) Stance
Dec-25 2025 2026 2025 2026 2025 2026 2025 2026
PPL 152.5 181.2 18.8 Buy 38.3 37.2 9.0 14.0 4.0 4.1 6% 9%
OGDC 194.9 230.8 18.4 Buy 39.7 41.7 12.0 21.0 4.9 4.7 6% 11%
MARI 459.0 429.7 (6.4) Sell 64.7 49.5 26.0 20.0 7.1 9.3 6% 4%
POL 577.8 627.7 8.6 Buy 95.4 110.2 65.0 76.0 6.1 5.2 11% 13%
With USD 55/bbl in FY25 and going forward

Dec-25 2025 2026 2025 2026 2025 2026 2025 2026
PPL 152.5 188.2 23.4 Buy 40.7 41.5 10.0 16.0 3.8 3.7 7% 10%
OGDC 194.9 241.0 23.7 Buy 43.9 46.7 14.0 24.0 4.4 4.2 7% 12%
MARI 459.0 466.8 1.7 Hold 65.7 57.8 27.0 23.0 7.0 7.9 6% 5%
POL 577.8 669.4 15.8 Buy 103.2 121.3 71.0 84.0 5.6 4.8 12% 15%
Base Case: Oil Prices Assumption (USD/bbl) and Fair Values

Dec-25 2025 2026 2025 2026 2025 2026 2025 2026
PPL 152.5 195.2 28.0 Buy 42.4 43.7 10.0 17.0 3.6 3.5 7% 11%
OGDC 194.9 249.1 27.8 Buy 48.8 49.2 15.0 25.0 4.0 4.0 8% 13%
MARI 459.0 488.2 6.4 Hold 67.0 64.4 27.0 26.0 6.9 7.1 6% 6%
POL 577.8 696.6 20.6 Buy 112.3 127.6 77.0 88.0 5.1 4.5 13% 15%
With USD 77/bbl in FY25 and USD 70/bbl in FY26

Dec-25 2025 2026 2025 2026 2025 2026 2025 2026
PPL 152.5 202.2 32.5 Buy 43.0 45.4 10.0 18.0 3.5 3.4 7% 12%
OGDC 194.9 251.3 29.0 Buy 48.1 51.6 15.0 26.0 4.0 3.8 8% 13%
MARI 459.0 500.0 8.9 Hold 66.8 65.0 27.0 26.0 6.9 7.1 6% 6%
POL 577.8 710.5 23.0 Buy 111.1 132.3 76.0 91.0 78.0 4.4 13% 16%

Dec-25 2025 2026 2025 2026 2025 2026 2025 2026
PPL 152.5 209.1 37.1 Buy 45.4 48.9 4.50 4.50 3.4 3.1 3% 3%
OGDC 194.9 261.7 34.3 Buy 52.3 56.5 9.75 10.25 3.7 3.5 5% 5%
MARI 459.0 529.3 15.3 Buy 67.9 71.3 237.00 285.00 6.8 6.4 52% 62%
POL 577.8 751.1 30.0 Buy 119.0 143.3 102.00 101.00 4.9 4.0 18% 17%

2025
Oil & Gas Development Company Limited (OGDC) OGDC

Summary Data
Paddling ahead in terms of liquidity
Strong liquidity post gas price revision Last Closing 194.9
After over a decade of struggles with circular debt, the gas tariff revision (re- Upside (%) 27.8
commenced in Feb'23) and subsidy removal have reduced OGDC's gas circular debt. Shares (mn) 4,300.9
Receivable collections in 1QFY25 reached 100%, up from 85% YoY. As of Sep'24, Free float (%) 15
trade receivables stood at PKR 608bn (down from PKR 635bn in Jun'24), with overdue Market Cap. (PKR mn) 838,122
receivables at PKR 547bn (down from PKR 561bn in Jun'24), showing a quarterly Market Cap. (USD mn) 3,018
recovery of PKR 14bn. OGDC is actively pursuing outstanding debt recovery from
customers and stakeholders. Additionally, OGDC recovered PKR 82bn from the Recommendation BUY
government in FY24, representing the principal amount invested in Privately Placed Price Performance
Term Finance Certificates issued by PHPL for the partial settlement of circular debt in 3M 6M 12M
2013. As a result, OGDC's cash and cash equivalents increased to PKR 265bn (PKR
Return (%) 54.5 46.9 102.7
61.58/share) as of Sep'24. OGDC may consider capital-intensive projects, such as
Avg. Volume (000) 6,983 6,600 9,255
offshore or frontier block drilling in Pakistan, and pursue acquisitions of new offshore
ADTV (mn) - PKR 1,119 979 1,243
or international blocks to expand its global footprint.
ADTV (000) - USD 4,026 3,520 4,445
Oil & gas production
High Price - PKR 197.6 197.6 197.6
Due to the reduction in gas demand by industries, the SNGP curtailed gas production
Low Price - PKR 126.1 114.1 96.1
from major fields such as Qadirpur, Nashpa, Chanda, and Dhok Hussain. Resultantly,
the gas production of OGDC has witnessed decline 6% YoY in FY24. The government
is taking steps to resolve the issue. Additionally, the company has undertaken
Foreign Others,
measures to augment production going forward. Going forward, we expect oil and gas Cos., 8%
production to increase by 7% and 4% YoY, respectively in FY25. Individual 3.02%
s, 4%
Efforts to fully maximize output from existing fields
Over the past year, the company has implemented measures to maximize production Privatisation
Commission
from mature fields and counter natural decline. In FY24, 11 wells were injected, adding of Pakistan ,
2,122 bopd of oil and 11 mmcfd of gas. The installation of electrical submersible pumps 8%
OGDCL-
at Pasakhi-11, Kunnar-8 & 11, and Sono-2 & 9 increased production by 4,850 bopd. Emplyees
Empow er
In the past 1.5 years, the company made four gas and condensate discoveries, along ment Govt. of
Trust, Pakistan,
with a tight gas find at Nur West-1, which are expected to add a combined 1,219 bopd
10% 67%
of oil and 61 mmcfd of gas. Looking ahead, the company plans to drill 10
exploratory/appraisal wells and 6 development wells in FY25
Highest hydrocarbon reserve life in Pakistan Relative Performance

OGDC's oil reserves have significantly improved over the past year, reaching 136mn OGDC KSE100
210%
bbls by Jun'24, up 56% YoY. This growth is driven by the addition of new fields such
as Shewa and Dhodak Deep, as well as a substantial increase in reserves at existing 190%
fields like KPD-TAY. Hence, OGDC holds highest reserve life in Pakistan, at 20-Yrs.
170%
Bettani ramping up production
150%
Since the early production facility came online in Jun'23, the Bettani field has been
producing 950 bopd of oil and 14 mmcfd of gas. With additional flows from Bettani-2 130%
and Bettani Deep-1 following successful drilling in FY24, production is expected to
110%
climb up to 3,000 bopd of oil and 35 mmcfd of gas.
90%
May-24
Jan-24
Jun-24
Mar-24
Feb-24
Jul-24
Apr-24
Oct-24
Earnings outlook
Nov-23
Sep-24
Dec-23
Aug-24
Nov-24
For FY25 and FY26, we project OGDC's earnings to arrive PKR 48.78/share and PKR
49.25/share, respectively. The scrip is currently trading at FY25e P/E, P/B and D/Y of
4.0x, 0.6x, and 7.7%, respectively.

2025
Exhibit: Key Ratios
2024a 2025e 2026f

Dividend Yield % 7.5 7.7 12.8
Exhibit: Key Financial Highlights*

PKR mn 2024a 2025e 2026f
Income Statement
Net Sales 463,698 464,066 474,626
Gross Profit 283,313 270,958 267,446
Operating Profit 261,863 252,236 248,935
Finance Cost 7,143 4,012 3,901
Post Tax Profit 208,976 209,803 211,819
Balance Sheet
Shareholder's Equity 1,250,496 1,346,443 1,473,791
Total Liabilities 353,758 370,138 449,712
Current Assets 1,060,489 1,075,175 1,144,095
Non-Current Assets 543,765 641,406 779,407
Total Assets 1,604,254 1,716,581 1,923,503
Source (s): Company Financial, AHL Research, *Unconsolidated
Figure: OGDC’s receivable compared to collection Figure: Hydrocarbon production in relation to EPS
Change in OGDC's Rec. OGDC collection (Mn BoE) BOE Sold EPS (RHS)
(PKR bn) (%) (PKR)
150.0 105.0 90 60
80 50
120.0 91.0
70 40
90.0 77.0
60 30
60.0 63.0
50 20
30.0 49.0
40 10
- 35.0 30 -
FY18
FY19
FY20
FY21
FY22
FY23
FY24
FY18
FY23
FY19
FY20
FY21
FY22
FY24
Source (s): Company’s Financials, AHL Research Source (s): PPIS, AHL Research

2025
Pakistan Petroleum Limited (PPL) PPL

Summary Data
Lucrative payout on the horizon
Robust cash flow stream to bolster higher payout Last Closing 152.5
The company's receivable collections have significantly improved over the past 1.5 Upside (%) 28.0
years, achieving 100% collection for two consecutive quarters. This improvement Shares (mn) 2,721.0
follows three gas price revisions in Jan'23, Nov'23, and Feb'24, which curtailed Free float (%) 25
circular debt and strengthened the company's financial position. As of Sep'24, trade Market Cap. (PKR mn) 415,029
debts stood at PKR 574bn (down from PKR 578bn in Jun'24), with overdue Market Cap. (USD mn) 1,494
receivables related to circular debt at PKR 532bn (a PKR 3bn sequential recovery).
Consequently, cash and cash equivalents rose to PKR 145bn (PKR 53.40/share) in Recommendation BUY
Sep'24, up from PKR 112bn in Jun'24. With healthy liquidity, a dividend of PKR Price Performance
10.00/share is expected in FY25. Additionally, the company plans to participate in 3M 6M 12M
offshore block bidding. Return (%) 41.9 27.6 94.3
Optimistic production forecast for FY25 Avg. Volume (000) 6,357 5,586 8,499
In FY24, oil and gas production declined by 5% and 14% YoY, respectively, primarily ADTV (mn) - PKR 836 707 1,008
due to natural depletion, lower offtakes from GENCO-II, and excessive back pressure ADTV (000) - USD 3,011 2,545 3,601
from SNGP due to system constraints. To address this, the company has started re- High Price - PKR 154.2 154.2 154.2
routing gas to SSGC and is considering reallocating gas production to other Low Price - PKR 103.4 103.4 78.5
customers to counter lower GENCO-II offtakes. As a result, we expect oil and gas
production to grow by 4% and 3% YoY in FY25, driven by new discoveries and the Shareholding Pattern
revival of production from existing fields. Others,
Modaraba
& Mutual 11%
Augmenting production from existing wells
Funds,
PPL has implemented many initiatives over the past 1.5 years to boost production 3.90%
from mature fields. The revamping of the Sui SML Compressor Station in FY24 FI's , 3%
increased production potential by ~19 mmcfd. Additionally, a low-cost, rig-less
Individuals,
production enhancement campaign added 37 mmcfd of gas and 630 bopd of 7%
condensate. To address natural decline at Adhi, three development wells were spud,
along with multiple production optimization efforts. In FY25, the company plans to PPL -
Emplyees Govt. of
spud 8 exploratory and 2 development wells to tap new reserves. Pakistan,
Empow erment
Trust, 7% 68%
Update on international blocks
The company has reached a settlement agreement with Midland Oil Company (Iraqi Source: Company Financials, AHL Research
oil company) to conclude the Exploration, Development, and Production Service
Contract at Block-8 in Iraq. As part of the settlement, PPL will receive USD 6mn (PKR Relative Performance
1,665mn). Meanwhile, at Abu Dhabi Offshore Block-5, the PPL-led consortium PIOL 200% PPL KSE100
has completed drilling two appraisal wells, with an exploratory well currently being
180%
drilled. The reserve size will be assessed upon completion of the appraisal phase.
160%
Renewal of Sui lease
The government has approved the Sui Mining Lease until 31st May’25. As a result, 140%
the company will enter into a D&P and Petroleum Concession Agreement to fulfill
120%
financial obligations (lease extension bonus, production bonus, and others) totaling
PKR 52.5bn or PKR 19.29/share. PPL plans to apply for an extension upon lease 100%
expiry in May’25.
80%
May-24
Jan-24
Jun-24
Feb-24
Mar-24
Jul-24
Apr-24
Oct-24
Nov-23
Dec-23
Aug-24
Nov-24
Sep-24
Earnings outlook
We forecast bottom-line to arrive at PKR 42.41/share and PKR 43.67/share in FY25
and FY26, respectively. The scrip is trading at an attractive FY25 P/E 3.6x, along with Source: Bloomberg, AHL Research
P/B and D/Y of 0.6x and 6.6%, respectively.

2025
Exhibit: Key Ratios
2024a 2025e 2026f


PKR mn 2024a 2025e 2026f
Income Statement
Net Sales 288,797 288,953 291,152
Gross Profit 189,381 186,390 186,427

Other income 16,977 15,884 26,828
Post Tax Profit 114,309 115,408 118,815
Balance Sheet
Shareholder's Equity 639,573 714,154 789,569

Current Assets 705,349 679,721 703,136

Total Assets 907,448 1,010,563 1,176,864
Figure: Sui Gas price in relation of oil price Figure: Change in receivable compared to collection
Arab Light Price Sui Gas Price (RHS) Change in PPL's Rec. PPL collection
(USD/bbl) (USD/mmbtu) (PKR bn) (%)
108 2.1 150.0 110.0
95 2.0
120.0 90.0
83
1.8
70 90.0 70.0
1.7
58
60.0 50.0
1.5
45
1.4 30.0 30.0
33
20 1.2 - 10.0
FY22a
FY18a
FY19a
FY20a
FY21a
FY23a
FY24a
FY18a
FY19a
FY20a
FY21a
FY22a
FY23a
FY24a
Source (s): Bloomberg, AHL Research Source (s): PPIS, AHL Research

2025
Fertilizer
Profitability outweighs
agricultural issues

2025
Profitability out - weighs the agriculture issues

Problems related to wheat summed up: In 2024, the government halved its wheat
procurement target, owing to the availability of 2.3mn tons of imported wheat in storage.
This led to a decrease in the market price of wheat, which fell to around PKR 3,000/bag
–3,100/bag between Mar’24 – May’24, below the minimum support price of PKR
3,900/bag. As a result, farmers withheld their wheat, reluctant to sell at such low prices.
Additionally, due to rainfall, the wheat grain had higher moisture content, prompting the
government to avoid procurement. The government also altered the process for wheat
sales, which created further complications. Farmer unions blamed the import of 3.2 million
tons of wheat for exacerbating the crisis. This situation negatively impacted agricultural
economics, as evidenced by a decline in fertilizer offtake.
Performance in agriculture sector: Agriculture forms the backbone of Pakistan’s

economy, contributing significantly to both its GDP and employment. In FY24, the sector
accounted for 24% of the GDP, reflecting a slight increase from 23% in FY23, highlighting
its sustained importance. Approximately 37% of the country’s workforce is employed in
agriculture, with the sector providing crucial livelihoods, especially in rural areas.
Additionally, agriculture is vital to Pakistan’s export economy, as nearly 70% of its exports
are derived from agricultural products such as textiles, rice, and wheat. The sector’s
performance has a direct impact on the overall economic health, influencing trade
balances, food security, and rural development. Therefore, maintaining stability in
agriculture is essential not only for economic growth but also for managing inflation,
ensuring food security, and boosting export revenues.
Gas Price Revision: In Feb’24, in line with the IMF's condition to reduce the gas
circular debt and eliminate subsidies, the government significantly increased the
feedstock price by 2.8x to PKR 1,597/mmbtu from the previous rate of PKR 580/mmbtu.
Simultaneously, the fuel stock price depicted a slight rise of 1%, reaching PKR
1,597/mmbtu, compared to the previous rate of PKR 1,580/mmbtu. Consequently,
fertilizer manufacturers such as EFERT and FFBL, which operate on the SNGP and
SSGC networks respectively, passed on the higher costs to consumers by increasing
urea prices. In contrast, FFC, which receives gas from the MARI network, continues to
benefit from the old rates, as no price hike has yet been announced for MARI's
consumers. Therefore, if gas price increase is notified to MARI’s customers, FFC will
likely have to jack up the urea prices by PKR 1,120/bag.
Homogenous urea prices: After over a year of disparities in urea prices among
manufacturers, the price gap has significantly narrowed. As of Feb’24, EFERT and FFC
were selling urea at PKR 4,435/bag and PKR 3,652/bag, respectively. By Nov’24,
however, all manufacturers have aligned their prices at PKR 4,308/bag, achieving price
harmony. On the other hand, the international price of urea in Nov’24 stood at USD
293/ton, a 26 YoY decrease from USD 397/ton, due to a slowdown in global urea demand.
Looking ahead to CY25, local urea prices are expected to rise following an anticipated
revision in gas prices. Among manufacturers, FFC is projected to experience the highest
price increase, potentially exceeding PKR 1,120/bag, due to the delayed impact of the
gas price hike that was last implemented in Feb’24.
International DAP prices influencing local price: In CY24TD, DAP prices

averaged around PKR 11,922/bag, up 9% YoY. In CY24, initially DAP prices remained
elevated (PKR 12,755/bag in Jan’24) due to higher phosphoric acid price and
international DAP prices. However, the decline in demand locally given weak purchasing
power of farmers and downturn international DAP prices resulted in decline in the DAP

2025
prices. In Nov’24, the local DAP price hovered around PKR 12,064/bag. On the
international DAP front, the price arrived at USD 580/tons in Nov’24 (averaging USD
563/tons in CY24TD) from USD 536/tons in Nov’23 (USD 550/tons in CY23), up 7% YoY
amid strong demand from India. The phosphoric acid prices reduced from USD 985/ton
in Nov’23 to USD 950/ton in Nov’24, down 4% YoY. During CY24, the Indian DAP import
remained lower due limited purchases. Meanwhile, Chinese exports remained
unchanged at 4.5mn tons amid fall in demand from India coupled with export restrictions
in China. The primary margin of DAP in 9MCY24 stood at ~USD 130/tons. Meanwhile,
the Middle East war has kept the DAP prices higher. In the event of escalation in
geopolitical issues in the Middle East, phosphoric acid and international DAP prices are
anticipated to climb up.
Weak purchasing power taking toll on offtake: During the 10MCY24, the urea sales
depicted decline of 9% YoY to 4.9mn tons compared to 5.4mn tons in SPLY. The decline
in urea sales is attributed to weak farm economics and a 58-day BMR shutdown of
EFERT’s EnVen plant. Meanwhile, DAP sales rose by 3% YoY to 1.2mn tons, driven by
higher purchasing in anticipation of rising DAP prices. By the end of CY24, urea and DAP
offtake is expected to reach 6.1mn tons and 1.6mn tons, respectively. Looking ahead,
urea and DAP sales are expected to stabilize at 6.6mn tons and 1.7mn tons, respectively,
in CY25.
Update on Pressure Enhancement Facility: The Pressure Enhancement Facility

Project, in which FFC, EFERT, and FATIMA are collaborating together with MARI to
develop and install pressure enhancement facilities at the MARI’s HRL reservoir is
ongoing. About 90% of scope 1 of Phase I has been completed and is slated to be finished
by year-end. Meanwhile, scope 2 of phase I is on track for completion in 2QCY25, while
order of compressors for Phase II is currently in progress.
Kissan Card Program- Solution to farmers woe? In an attempt to support the farmers,
the Punjab Govt has announced PKR 400bn Kisan Card Program on 29th Oct’24. The
government plans to increase the number of Kisan Cards from 500k to 750k. Under this
program, free laser levelers will be provided to farmers cultivating wheat on 12.5 to 25
acres of land coupled with tractors to famers to cultivating above 25 acres. Moreover, the
agricultural machinery offered under the program will be on a no profit rental basis to
farmer. The card holders will now be able to buy seeds, fertilizers, and pesticides at
subsidized rates of ~PKR 150,000. The program comes at the time of commencement of
Rabi season and will encourage the farmers (some of whom plan to skip planting wheat
crop) to grow wheat.
Key Risk (s)
▪ Inability to pass on the impact of hike in gas price to end consumers.

▪ Disruption of gas supply
▪ Natural calamity such as floods can negatively fertilizer offtake

2025
Figure: Offtake and prices of Urea and DAP Figure: International Urea and DAP prices
Urea Offtake DAP Offtake Urea DAP
Urea Price (RHS) DAP Price (RHS) (USD/ton)
(Tons) (PKR/bag) 650
7,000 14,000 600
6,000 12,000 550
5,000 10,000 500
4,000 8,000 450
3,000 6,000 400
2,000 4,000 350
1,000 2,000 300
- - 250
Jul-24
Dec-23
Jan-24
Mar-24
Nov-23
Jun-24
Aug-24
Sep-24
Apr-24
Oct-24
Nov-24
Feb-24
May-24
CY14a
CY15a
CY16a
CY17a
CY18a
CY19a
CY20a
CY21a
CY22a
CY23a
CY24e
Source (s): NFDC, AHL Research Source (s): Bloomberg, AHL Research
Figure: Phosphoric acid in relation to international DAP price Figure: Urea prices of major Urea producers
Phos Acid Prices DAP Prices (RHS) FFC EFERT

(PKR/bag)
(USD/ton) (USD/ton) FFBL FATIMA
5000
1800 870
4500
1500 750
1,460 4000
1200 630
3500
900 1,020 510
984 959 3000
600 694 390
626 2500
300 270
2000
Jul-23
Jul-24
Jan-23
Jan-24
Nov-22
Sep-23
Nov-23
Sep-24
Nov-24
Mar-23
May-23
Mar-24
May-24
0 150
CY20a
CY19a
CY21a
CY22a
CY23a
CY24a
Source (s): Bloomberg, AHL Research Source (s): Fertilizer Dealers, AHL Research

2025
Fauji Fertilizer Company Limited (FFC) FFC

In pursuit industrial dominance Summary Data
Unification of FFC & FFBL Last Closing 278.2
In CY24, Fauji Fertilizer Company Ltd and Fauji Fertilizer Bin Qasim Ltd announced Upside (%) 30.0
and approved an amalgamation, merging FFBL's entire undertaking into FFC. FFBL Shares (mn) 1,272.2
has 1,291 million outstanding shares, while FFC has 1,272 million, with FFC holding
Free float (%) 55
a 49.9% stake in FFBL The companies agreed to a swap ratio of 4.29 FFBL shares
Market Cap. (PKR mn) 353,886
per 1 FFC share, resulting in the cancellation of FFBL shares and issuance of 151mn
Market Cap. (USD mn) 1,274
new FFC shares to FFBL shareholders. This will yield a book value of PKR
143.33/share for the merged entity. Post-merger, FFC’s capacity will reach 2.60mn Recommendation BUY
tons of urea and 0.65mn tons of DAP, securing market shares of ~43% in urea and Price Performance
~60% in DAP. This horizontal merger is expected to eliminate double taxation and
3M 6M 12M
generate operational, financial, and expansionary synergies.
Return (%) 63.3 103.5 197.9
Intention to acquire of Agritech Limited Avg. Volume (000) 2,291 2,013 1,894
FFC aims to acquire a 64.43% controlling stake in Agritech Limited (AGL), which has ADTV (mn) - PKR 525 409 316
a urea capacity of 0.4mn tons (4% market share in terms of sale) and an SSP
ADTV (000) - USD 1,888 1,470 1,135
capacity of 0.08mn tons. This acquisition would increase FFC’s urea market share
High Price - PKR 287.1 287.1 287.1
by 48%. After acquiring a 24.97% stake from NBP, FFC now holds 28.86% of AGL.
Low Price - PKR 169.6 128.7 92.9
In Oct’24, announced a public offer to acquire an additional 35.57% (151mn shares)
at PKR 38.84/share.
Reaping fruits of lower gas prices Others,
FFC is procuring feed and fuel gas at a lower rate of PKR 580/mmbtu, and PKR 13%
1,580/mmbtu, respectively while consumers on SNGP and SSGC are receiving feed Associate
and fuel at PKR 1,597/mmbtu each. This cost advantage supports FFC's strong gross FI's, 7% d Cos.,
44%
margin, (51.84% reported in 3QCY24, up 2,091 bps YoY). If Mari gas prices are
revised, likely in 1HCY25, FFC may need to raise urea prices by PKR 1,200/bag to Public Sector
Cos. & Corp.,
offset the impact. We estimate that each one-month delay in the Mari gas price 12%
revision could boost FFC's after-tax earnings by PKR 2.26/share.
Earnings to clock in at PKR 45.39/share in CY25 Individuals

, 24%
As a merged entity with FFBL profitability is projected in CY25 and CY26 to be PKR
59.30/share and PKR 60.89/share. For CY25 and CY26, we expect FFC’s EPS to be Source: Company Financials, AHL Research
PKR 45.39 and PKR 46.26, respectively. Key growth drivers for combined FFC &
FFBL are robust margins in core businesses tagged with dividend income from AKBL, Relative Performance
FFL, PMP, FFCEL, FFBL Power Company Limited, FWEL I and FWEL II.
340% FFC KSE100
Thar Energy contribution
300%
We anticipate earnings contribution of PKR 3.59/share and PKR 3.90/share on
annualized basis in CY25 and CY26, respectively from Thar Energy. Moreover, the 260%
Thar Energy contributes PKR 5.51/share to our target price.
220%
Urea and DAP offtake to stabilize from CY25
180%
With weak agronomics, we expect urea and DAP sales in the CY24 to be 2.4mn tons
and 0.1mn tons, respectively. In CY25 and CY26, we expect the urea and DAP sales 140%
to stabilize at 2.5tons and 0.2mn tons, respectively.
100%
May-24
Jan-24
Jun-24
Mar-24
Feb-24
Apr-24
Oct-24
Jul-24
Nov-23
Dec-23
Nov-24
Aug-24
Sep-24

2025
Exhibit: Key Ratios
2024e 2025f 2026f


PKR mn 2024e 2025f 2026f
Income Statement
Net Sales 223,902 286,597 292,566
Gross Profit 104,362 114,701 116,367
Finance Cost 5,189 4,257 2,403
Post Tax Profit 57,095 57,999 58,853
Balance Sheet
Current Assets 131,699 164,360 170,934
Total Assets 247,159 287,924 307,419

Figure: FFC’s profitability Figure: Dividend payout
PAT Net Margins (RHS) DPS Payout Ratio (RHS) (%)

(PKR bn) (%) (PKR)
70.0 30.0 40.0 80.0

58.0 34.0 35.0
57.1 58.9 35.0 33.5 77.5
60.0 25.0
30.0 75.0
50.0
20.0
25.0 72.5
40.0
29.7 15.0 20.0 70.0
30.0 15.5
15.0 12.1 67.5
20.0 10.0
20.0 10.0 65.0
10.0 5.0
5.0 62.5
- - - 60.0
CY22A CY23E CY24e CY25f CY26f CY22A CY23E CY24e CY25f CY26f

2025
Cements
Robust margin game

2025
Margins Expansion
“Renewables” the only option for survival: Industries experienced some relief when
government raised the consumer base tariff by PKR 5.72/kWh in Jul’24, leaving industrial
base tariffs unchanged. However, the cost of grid electricity for industrial consumers
remains higher than that of neighboring countries. This continues to hinder Pakistan’s
competitiveness in the region. To mitigate the impact of these high tariffs, many cement
companies have turned to renewable energy sources, such as solar, waste heat recovery,
and wind power.
Additionally, some have installed coal power plants to reduce reliance on the national grid,
thereby lowering their overall energy costs. These strategic shifts have helped cement
companies protect profitability and maintain their margins. The sector's average energy
mix consists of 24% from the grid, 32% from waste heat recovery, 25% from captive, and
18% from renewables.
Coal the largest cost contributor: Coal is a vital raw material, accounting for
approximately 40%-45% of the total cost of cement production. It is used as a primary
input, and the price of cement is highly correlated to the cost of coal. In FY23 coal prices
were recovering from the effects of Russia-Ukraine conflict, which in Mar’22 took coal
prices to a peak level of USD 460/ton. In FY23, the coal price averaged at ~ USD 202.4/ton
and closed at USD 100/ton due to slowdown in the global activity and excess supply of
coal. The momentum was carried in FY24, majorly due to suppressed demand from
China, resulting in commodity price to be soft during the year arriving at an average of
USD 108/ton.
This lower international coal prices helped the cement industries improve their margins
hence boosting the profitability. Furthermore, to be protected from the fluctuations in the
international coal prices and PKR against the greenback, the cement companies
incorporated a diverse mix of fuel, by adoption of alternative coal sources, such as Afghan
and local coal. Due to this, the cement companies in FY24 experienced an increase in
profitability by 61% YoY to PKR 81.0bn compared to PKR 50.4bn in FY23. Although, some
companies were adversely impacted by the change in tax on exports regime from
presumptive to normal tax.
Exhibit: International coal prices witnessed a decline of 47% YoY during FY24 Exhibit: Cement Sector Profit after tax
International Coal Prices Avg. Coal Prices PKR m n FY24 FY23 YoY
(USD/ton) LUCK* 28,107 13,726 105%
250 BWCL 13,769 11,892 16%
214.0
202.4 KOHC 8,893 5,821 53%
200
FCCL 8,223 7,440 11%
MLCF 6,891 5,771 19%
150
107.8 CHCC 5,500 4,404 25%
94.0 88.0
100 80.0 PIOC 5,176 2,611 98%
67.7
DGKC 542 -3,636 nm
50 Others 3,920 2,337 68%
Total 81,022 50,365 61%
0
FY18 FY19 FY20 FY21 FY22 FY23 FY24
*Unconsolidated
Source (s): Bloomberg, AHL Research

2025
Cement growth outlook: Inflation has begun to ease, with Oct’24 recording a rate of Exhibit: Cement Dispatches
7.2% compared to 26.8% during Oct’23. This decline has triggered a series of policy m n tons 4MFY25 4MFY24 YoY
rate cuts, dropping from 22.0% in Jun’24 to 15.0%, a reduction of 700bps. The
North 10.4 11.7 -11%
disinflation is projected to continued, which could prompt the SBP to further reduce
Local 9.6 11.1 -13%
interest rates, providing essential support for economic recovery. Furthermore, the real
Exports 0.7 0.6 29%
interest rate in Nov’24 stood at 7.8%, a level that is unsustainable, further bolstering the
case for additional rate cuts. South 4.3 4.2 1%
Local 1.8 2.3 -24%
The local cement dispatches have declined by 15% YoY during 4MFY25, primarily due Exports 2.5 1.9 31%
to fiscal measures introduced in the FY25 budget and the imposition of royalties on Total Local 11.4 13.4 -15%
cement manufacturers in Punjab. However, demand is expected to recover as inflation
Total Exports 3.2 2.5 31%
eases and interest rates decline, with a projected decline of around 9% for FY25 in the
Grand Total 14.6 15.9 -8%
local cement dispatches. Looking ahead to FY26, the combination of low inflation and
So urce (s): A P CM A , A HL Research
reduced interest rates is expected to drive further demand growth, with local dispatches
anticipated to rise by 5% YoY.
Figure: Policy rate Trend and forecast Figure: Local cement dispatches in FY24 down by 5% YoY
24% (mn tons) Local Exports YoY (RHS)

70.0 23%
22%
60.0 15%
20%
9.3
50.0 5.2
18% 8%
4.7 6.5 7.8 4.6 7.1
40.0
16% 5.9 4.7
0%
15.0% 30.0 7.2
14% 13.5%
12.0% 48.1 47.6 -8%
20.0 41.1 40.3 40.0 40.0 38.2
12% 33.0 35.7
28.2 -15%
10% 10.0
Jul-24
Jun-24
Aug-24
Sep-24
Oct-24
May-24
Nov-24
Dec-24
Jan-25
Jun-25
Feb-25
Mar-25
Apr-25
May-25
- -23%
FY24
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23
Source (s): SBP, AHL Research Source (s): APCMA, AHL Research
Risk
1. Cement price cut scenario
2. Slower rebound in cement demand.
3. Uptick in international coal prices also rendering higher coal prices in Afghanistan,
Mozambique and local market.
4. Slowdown in the economy with need for higher tax revenue to force the government
to impose more taxes on industries.

2025
Lucky Cement Limited (LUCK)

LUCK
At the Summit Summary Data
Target Price (Dec'25) 1,255.9
One of our picks in the AHL cement universe is Lucky Cement Limited (LUCK), which
Last Closing 1,041.3
offers an upside of 20.6% from last closing to our Dec’25 SoTP based target price of
Upside (%) 20.6
PKR 1,256/share. The company's diverse portfolio is anticipated to serve as a
Shares (mn) 293.0
safeguard against disruptions in cyclical operations, including those in the cement and
Free float (%) 30
automobile sectors.
Dominant Force in the Cement Sector Market Cap. (USD mn) 1,098
LUCK’s 3.15mn tons brownfield expansion in the North, commissioned in FY23 and
become the largest cement producer in the country, with a total capacity of 15.3mn Recommendation BUY
tons. In FY24, the company’s market share increased by 2.2%, reaching 18.7%. Price Performance
Additionally, LUCK boasts an extensive distribution network of over 200 dealers and 3M 6M 12M
distributors. It is also the only company in Pakistan with port silos, enabling the export
Return (%) 22.5 19.5 45.0
of loose cement.
Avg. Volume (000) 228 212 269
Strategic Investment in Energy Optimization ADTV (mn) - PKR 205 191 222
Following the successful completion of a 25 MW solar plant in 1QFY24, the company ADTV (000) - USD 739 687 791
has added two more solar plants with capacities of 6.3 MW and 6.0 MW in Karachi
High Price - PKR 1,041.3 1,041.3 1,041.3
and Pezu, respectively, bringing its total solar capacity to 74.3 MW. In addition, LUCK
Low Price - PKR 813.3 813.3 670.1
operates a 56 MW waste heat recovery plant. The company recently commissioned a
28.8 MW wind power project at its Karachi plant, which will reduce cost of production
by ensuring that nearly 50% of its energy needs are met through renewables.
Others,
14%
Multi-Sector Business Strategy
To diversify its revenue streams, LUCK has strategically invested across various Foreign, Sponsors,
9% 25%
sectors. The company’s portfolio includes an automobile assembly venture for Kia and
Peugeot vehicles, a mobile phone assembly plant in collaboration with Samsung, and
a wind power plant. Additionally, LUCK has overseas cement operations in the Directors
& Spouse,
Democratic Republic of Congo and Iraq. Furthermore, LUCK has presence in the 15%
energy sector through investment in 660MW coal power plant (LEPCL) that achieved
CoD in Mar’22 and is currently operating at full capacity. Furthermore, LUCK invested Associated
Indviduals, Cos, 25%
PKR 1.0bn in National Resources Private Limited for copper and gold mining. 13%
IPPs renegotiations might reduce profitability Source: Company Financials, AHL Research
Potential challenges could arise due to the government’s renegotiation efforts with
IPPs aimed at reducing the power tariff. We have prepared a sensitivity of the impact Relative Performance
of reduction in the RoE component, this would also impact the SoTP valuation. LUCK KSE100
190%
Despite these potential setbacks, LUCK’s diverse portfolio mix is expected to cushion
the impact and mitigate significant downside risk. 170%
Exhibit: Sensitivity Analysis 150%
EPS (PKR)
RoE SoTP (PKR) 130%
FY25e FY26f
Base case 13.6% 186.8 163.9 1,256 110%
Case 1 16.3% 190.3 170.8 1,288
90%
Case 2 19.0% 193.7 177.6 1,319
May-24
Jan-24
Jun-24
Mar-24
Feb-24
Jul-24
Apr-24
Oct-24
Nov-23
Dec-23
Aug-24
Sep-24
Nov-24
Case 3 21.8% 197.2 184.4 1,351

Case 4 27.2% 204.1 198.1 1,415

2025
Profitability is expected to remain strong on unconsolidated basis: LUCK’s bottom
line is expected to maintain its growth, mainly due to expected rise in cement demand in
FY26, supported by cost reduction initiatives taken by the company, and dividend from
its subsidiary and associate companies.
Exhibit: Key Ratios*

2024a 2025e 2026f

Source (s): Company Financials, AHL Research, *Unconsolidated

PKR mn 2024a 2025e 2026f
Income Statement
Net Sales 115,325 133,875 153,738
Gross Profit 38,805 47,204 52,368
Finance Cost 1,581 1,438 692
Post Tax Profit 28,107 32,112 34,901
Balance Sheet
Current Assets 68,452 103,818 145,394
Total Assets 234,018 264,554 301,229
Figure: LUCK: SoTP Valuation (Dec’25) Figure: Dispatches and Utilization

Congo Samsung, Yunus Local Exports Utilization (RHS)
Project, 107 38 Energy, 7 (mn tons)
10.0 70%
8.0 3.4 65%

2.2 3.1 3.2
LMC, 111 2.7
6.0 60%
LCI, 155 Core*, 660

4.0 55%
6.3 5.9 6.1 6.0 6.4
Iraq Project, 2.0 50%
177
0.0 45%
2024a 2025e 2026f 2027f 2028f
Source (s): Company Financials, AHL Research, *Dividends from LEPCL included Source (s): Company Financials, AHL Research

2025
Fauji Cement Company Limited (FCCL) FCCL

Summary Data
Safe and secure Target Price (Dec'25) 44.6
Last Closing 32.5
Our Dec’25 target price for Fauji Cement Company (FCCL) is set at PKR 44.6/ share,
Upside (%) 37.2
whereby the stock offers a return of 37.2% from last closing. Our positive outlook for
Shares (mn) 2,452.8
the stock stems from its recent merger with Askari Cement and the addition of a
Free float (%) 35
2.05mn ton brownfield project, which has positioned FCCL as the third-largest player
in the industry and the second-largest cement producer in the northern region.
Market Cap. (USD mn) 287
Furthermore, with the commissioning of a 2.05mn ton greenfield project in Feb’24,
FCCL's total installed capacity has now reached 9.26mn tons.
Recommendation BUY
Greenfield project commenced in a record time
Price Performance
FCCL successfully commissioned its Greenfield cement manufacturing plant in D.G.
3M 6M 12M
Khan on 01-Feb-24, with a production capacity of 6,500 tons/day. The Greenfield
Return (%) 62.6 49.9 105.1
project was completed in a record 13 months, underscoring FCCL’s strong
commitment to growth. This expansion is expected to boost the company’s market Avg. Volume (000) 9,837 9,964 9,583
share, enhance its competitiveness, and open doors to international markets. ADTV (mn) - PKR 277 253 217
ADTV (000) - USD 996 909 777
Quest for cheapest alternate fuel and power
High Price - PKR 35.1 35.1 35.1
During FY24, the company installed an additional 12.5MW solar plant, bringing its total
solar capacity to 52.5MW. Additionally, it added a 12MW waste heat recovery plant Low Price - PKR 19.4 19.3 15.4
(WHRP) to help mitigate high tariff costs. As a result, approximately 52% of the
company's power needs in FY24 were met through inhouse generation. To further Shareholding Pattern
reduce its reliance on the national grid, the company plans to install an additional Others,
Modaraba 5%
15MW of solar capacity by 3QFY25, with an expected payback period of 3.5 years. In & Mutual FI's, 4%
Funds,
terms of fuel mix, about 31% of the company's consumption was local coal, while the
4%
remainder was a blend of Afghan and imported coal. The company also used 5%
alternative fuel to cut production costs and aims to increase this to 10-11% by FY25, Joint Stocks
Cos., 5%
further enhancing its cost-efficiency.
Installation of polypropylene (PP) bags

The company has announced plans to establish a Polypropylene (PP) bag Indviduals
Associate
, 16%
manufacturing plant, representing a significant investment of PKR 1.0bn. This strategic d Cos.,
67%
initiative is expected to meet approximately 90% of the company's packaging
requirements, thereby reducing its reliance on external suppliers and improving overall Source: Company Financials, AHL Research
supply chain efficiency. The project is anticipated to have a payback period of 4-5
years. Relative Performance
Earnings to reach all time high level 265% FCCL KSE100
We expected the company to post record earnings of PKR 5.3/share in FY25, driven 240%
by the successful expansion of its greenfield project and improved power mix
215%
efficiency. This growth results from increased production capacity and better energy
utilization. We also expect a dividend of PKR 1.50/share during FY25. 190%
165%
140%
115%
90%
May-24
Jan-24
Jun-24
Mar-24
Feb-24
Apr-24
Oct-24
Jul-24
Nov-24
Nov-23
Dec-23
Aug-24
Sep-24

2025
Exhibit: Key Ratios

2024a 2025e 2026f

Exhibit: Key Financial Highlights

PKR mn 2024a 2025e 2026f
Income Statement
Net Sales 80,026 89,398 92,947
Gross Profit 25,680 30,824 34,307
Finance Cost 5,237 3,961 2,808
Post Tax Profit 8,223 13,021 15,622
Balance Sheet
Current Assets 25,784 36,543 46,234
Total Assets 147,636 159,918 165,477
Source (s): Company Financial, AHL Research
Figure: Profitability and Gross Margins Figure: Dispatches and Utilization
Profit after tax Gross Profit Margins (RHS) Local Exports Utilization (RHS)
(PKR bn) (mn tons)
18.0 17.2 40% 6.0 60%
15.6 15.4
15.0 5.0 0.79
13.0 37% 0.52 0.60 0.66 0.72 58%
12.0 4.0
34% 56%
9.0 8.2 3.0
31% 4.7 54%
4.6 4.4 4.6 4.4
6.0 2.0
28% 52%
3.0 1.0
- 25% 0.0 50%

2024a 2025e 2026f 2027f 2028f 2024a 2025e 2026f 2027f 2028f

2025
Maple Leaf Cement Factory Limited (MLCF) MLCF

Summary Data
Operational efficiency Target Price (Dec'25) 53.9
Last Closing 40.5
Our Dec’25 target price for Maple Leaf Comet (MLCF) is set at PKR 53.9/share. Our
Upside (%) 32.9
liking for the stock stems from i) one of the highest gross margins, ii) one of the lowest
Shares (mn) 1,047.6
EV/ton in AHL cement universe and iii) diverse fuel mix. The stock offers an upside of
Free float (%) 45
32.9% from last closing; we recommend BUY.
Proactive growth and buyback measures Market Cap. (USD mn) 153
In Nov’22, MLCF completed the commissioning of a new grey clinker production line
with a capacity of 7,000 metric tons per day (2.1mn tons annually), increasing its total Recommendation BUY
clinker capacity to 7.8mn tons. As one of the first industry players to operationalize Price Performance
this expansion, MLCF set itself apart as a leader in the sector. The newly established
3M 6M 12M
plant not only improves the company’s operational efficiency but also gives MLCF a
Return (%) 23.5 1.6 4.1
competitive edge in the ongoing expansion phase. This development reinforces
Avg. Volume (000) 7,512 6,308 6,074
MLCF’s dominance in the northern market, making it the largest producer in the region
at a single location. Additionally, following the successful buyback of 25mn shares, ADTV (mn) - PKR 280 237 233
MLCF in FY24 repurchased another 25.8mn shares, representing 2.4% of its paid-up ADTV (000) - USD 1,008 852 832
capital and 21.9% of its free float. High Price - PKR 43.0 43.0 43.0
Low Price - PKR 32.2 32.2 32.2
Better Energy Mix
MLCF is well positioned to mitigate rising electricity costs due to internal power
generation capabilities. Its subsidiary, Maple Leaf Power (MLPL), operates a 40 MW Shareholding Pattern
coal-fired power plant. Moreover, MLPL profits are exempt from charge of income tax Others,
Foreign , 5%
on profits, resulting in fall in effective taxation for MLCF. In addition, MLCF has Modaraba 5%
& Mutual
successfully installed a 12.5 MW solar power plant, offering partial protection from Funds,
escalating tariffs. The company has also completed a Waste Heat Recovery Plant 7%
(WHRP) for its new Line-4, expanding its capacity from 25 MW to 37 MW, which now FI's, 6%
covers one-third of the company’s total power expenses. These energy initiatives
have enabled the company to maintain higher margins than its competitors.
Kohinoor
Textile
Prudent steps taken to change the fuel mix
Mills, 58%
MLCF was the first in the industry to use Afghan coal. This has been a game changer Indviduals
, 19%
as local and Afghan coal became a substantial part of the fuel mix used by the cement
manufacturers in North. Furthermore, the company is also using biomass, such as Source: Company Financials, AHL Research
rice husk, to further lower its production cost, resulting in higher margins for the
company. Relative Performance
Market leader in white cement 180% MLCF KSE100
MLCF is one of the few cement producers in Pakistan with a presence in the white
cement market, commanding over 90% of the domestic market share. It is also the 160%
country's largest exporter of white cement. While, in FY24 white cement accounted
140%
for approximately 3.75% of MLCF’s total sales, it is sold at a premium compared to
grey cement, further enhancing its value contribution. 120%
100%
80%
May-24
Jan-24
Jun-24
Mar-24
Feb-24
Apr-24
Oct-24
Jul-24
Nov-23
Aug-24
Dec-23
Sep-24
Nov-24

2025
Exhibit: Key Ratios
2024a 2025e 2026f
Dividend per share PKR - - 3.0
Dividend Yield % - - 7.4


PKR mn 2024a 2025e 2026f
Income Statement
Net Sales 66,452 61,436 62,374
Gross Profit 22,430 22,128 24,152
Finance Cost 3,535 1,960 1,207
Post Tax Profit 6,920 7,398 8,743
Balance Sheet
Current Assets 27,375 27,118 26,950
Total Assets 100,344 97,305 94,255
Figure: Profitability and Gross Margins Figure: Dispatches and Utilization

Profit after tax Gross Profit Margins (RHS) Local Exports Utilization (RHS)
(PKR bn) (mn tons)
12.0 11.0 43% 4.1 52%
9.7 3.9 51%
10.0 40% 0.2
8.7
50%
7.4 3.8
8.0 6.9 37% 0.3 48%
3.6
0.2
6.0 34% 47%
3.5 0.2 0.2
3.8 46%
4.0 31%
3.3 3.6 45%
3.5
2.0 28% 3.2 3.4 3.4
43%
- 25% 3.0 42%
2024a 2025e 2026f 2027f 2028f 2024a 2025e 2026f 2027f 2028f

2025
Power generation
& distribution
Through turbulent waters

2025
Through turbulent waters

Government determined to reduce power tariff
FY25 consumer end tariff: The government announced a hike in consumer base tariff in
FY25 to PKR 35.50/KWh from PKR 29.78/KWh in FY24. The major reason for the jump in
the consumer tariff was due to the increased higher reliance on RLNG for power
generation, along with reduced use of both local and imported coal compared to the
assumptions made for FY24. Additionally, capacity charges increased due to the
anticipated devaluation of the PKR against the USD and the addition of new power
generation capacity. This led to energy charges and capacity charges to rise by PKR
3.31/KWh and PKR 1.38/KWh to arrive at PKR 10.94/KWh and PKR 18.39/KWh,
respectively, making Pakistan’s energy tariff one of the highest in the regions.
Exhibit: Reference Power Tariff for FY25 increased by PKR 5.72/KWh

FY24 FY25
PKR bn PKR/KWh PKR bn PKR/KWh
Units received (billion KWh) 124.76 121.84
T&D losses (%) 11.70 11.43
Units delivered (billion KWh) 110.17 106.14
Energy Charges 840 7.63 1,161 10.94
Capacity Charges 1,874 17.01 1,952 18.39
Use of System Charges 151 1.37 164 1.54
Generation cost 2.866 26.02 3,277 30.88
Disco Margin 341 3.10 391 3.68
Prior Year Adjustments (PYA) 74 0.67 100 0.94
Revenue Requirement 3,281 29.78 3,768 35.50
Source (s): NEPRA, AHL Research
Reasons for increase: There are several reasons for the sharp rise in electricity tariffs
in the country over the past few years. Below, we have outlined one of the major factors
contributing to this increase;
1) Rise in Capacity Payments: The induction of new power plants and the Exhibit: Reference Capacity Charges for FY25
depreciation of the Pakistani Rupee (PKR) have caused a significant rise in Source PKR bn % Share
capacity payments. By FY24, these payments reached PKR 1,874bn (PKR
Nuclear 466 22.3%
17.01/KWh), up from PKR 275bn (PKR 3.08/KWh) in FY16. For FY25, the
Hydel 446 21.4%
government's projection is PKR 1,952bn (PKR 18.39/KWh). The largest share of
Coal (Imported) 395 18.9%
capacity payments is attributed to nuclear power plants (22.3%), followed by hydel
(21.4%), imported coal (18.9%), and local coal (12.2%). Other contributors include Coal (Local) 256 12.2%
RLNG, wind, gas, RFO, solar, and bagasse. RLNG 168 8.0%
Wind 168 8.0%
2) Currency Depreciation: The depreciation of PKR (62% since November 2017)
RFO 81 3.9%
has increased the revenue requirements of Independent Power Producers (IPPs),
whose tariffs are linked to the USD. This has led to higher electricity tariffs for Gas 61 2.9%
consumers. Solar 42 2.0%

Bagasse 7 0.3%
3) Capacity Addition: Since 2016, ~18,000 MW of new power generation capacity
Total 2,091
has been added, contributing to higher overall capacity payments and driving up
electricity tariffs. Source (s): NEPRA, AHL Research
4) Decline in Demand: Electricity demand has been declining for the past two years,
primarily due to rising electricity prices, inflation, reduced industrial demand, and
increased solarization.

2025
Government to curtail the power tariff

To address this issue, the government decided to reform the power sector and formed a
high-level task force for the purpose of implementing structural reforms. The task force’s
responsibility included recommending measures to make the power sector financially and
operationally sustainable, overseeing the development of an efficient and liquid power
market, and recommending the utilization of excess capacity by industries and special
economic zones to stimulate growth.
We have identified several measures that can lead to a reduction in electricity tariffs;
1) Power Holding Charges: As of May 2024, PKR 765bn of the total circular debt of
PKR 2,655bn is held by Power Holding Limited, with the associated finance costs
passed on to consumers. If the government absorbs this debt, electricity tariffs
could decrease by PKR 3.23/KWh.
2) Debt Restructuring with Chinese IPPs: The government is negotiating with

Chinese IPPs, which account for 20% of the total power capacity, to extend
repayment periods of front-loaded debts. This could save PKR 277bn and reduce
tariffs by PKR 2.61/KWh.
3) Captive Gas Diversion to IPPs: If the gas used by 1,500 MW of captive power
plants (with lower efficiency) were redirected to more efficient IPPs, about 3,000
MW could be generated, reducing electricity costs by approximately PKR
3.35/KWh.
4) Distribution Losses: The allowed T&D losses for FY25 are 11.43%. Reducing this
threshold by 5% could lower tariffs by PKR 1.90/KWh. Transmission infrastructure
issues, such as overloading and inadequate capacity, have led to inefficiencies. In
FY24, T&D losses and short recoveries reached PKR 509bn, contributing to
circular debt. Privatization of distribution companies (DISCOs), like K-Electric,
could help reduce these losses.
5) Power Demand: The government plans to sell 106.14bn units in FY25 with a
revenue requirement of PKR 3,768bn (PKR 35.5/KWh). A 5% increase in power
consumption could reduce the average cost by PKR 1.17/KWh.
6) “Take or Pay” to “Take and Pay” Conversion: The government is negotiating to
convert contracts with 18 IPPs from a "take or pay" model to "take and pay." This
could save around PKR 110bn and lower tariffs by PKR 1.04/KWh. However, some
fixed costs will still persist, limiting the full reduction.
7) Agreement with Five IPPs: In Oct’24, the Govt reached an agreement to
terminate Power Purchase Agreements (PPAs) with five IPPs, saving consumers
PKR 60bn and reducing tariffs by PKR 0.57/KWh. These IPPs have received their
outstanding payments (excluding interest).

2025
Circular debt position of Pakistan

Pakistan Circular Debt (CD) position within its power sector is on a rising trend for several
years, and has recently increased significantly due to a rapid expansion in electricity
generation capacity over the past five years and devaluation of the PKR against the USD.
As of Jun’24, the circular debt stood at PKR 2,393bn, up from PKR 2,310bn in Jun’23. Of
this total, ~PKR 683bn is managed by Power Holding (Pvt.) Limited (PHPL), while the
remaining PKR 1,710bn is owed to Independent Power Producers (IPPs) and Generation
Companies (GENCOs). Under the IMF’s Stand-By Arrangement (SBA) guidelines,
Pakistani authorities are required to keep the circular debt at PKR 2,393bn.
Figure: Trend of circular debt position
(PKR bn) IPPs/GENCOs Power Holding
2,700
2,400
683
2,100
765
800
930
1,007
1,800
1,500
806
1,200
1,710
1,545
583
900
1,452
432
1,350
1,143
600
Jun-16 321 335
Jun-15 314 335
812
560
544
300
-
Jun-17
Jun-18
Jun-19
Jun-20
Jun-21
Jun-22
Jun-23
Jun-24
Source (s): PIDE, NEPRA State of Industry Report 2023, AHL Research
Circular debt management plan FY25: The ECC approved a plan from
the Ministry of Energy (Power Division) to reduce liabilities in the power sector and
improve financial sustainability. The Govt projects the stock of circular debt (CD) is
expected to reach at PKR 2,429bn at the end of FY25 compared to PKR 2,393bn at the
end of FY24. Further, the Government also intends to curtail the CD flow to minimum
possible level for FY25; the govt is to take the following actions;
1) By giving an additional subsidy of PKR 228bn during FY25.

2) By converting the old debt of Power Holding into public debt and gradually retire it
through budget allocations.
3) In FY25 payment of PKR 358bn would be made to lPPs/GPPs as an outcome of
negotiations / revision of PPAs. This will reduce the stock of circular debt.
4) In FY25, the distribution companies are permitted to incur losses of up to 11.4%. The
actual losses for FY24 were 18.3%, and the government expect them to reduce to
17.3% in FY25. The lower losses in FY25 compared to FY24 will help to reduce the
stock of circular debt.
5) CDMP for FY25, considering the significant tariff hikes and budgeted subsidies, the
recovery ratio targets have been set at 90%.

2025
The Hub Power Company Limited (HUBC) HUBC

Summary Data
Turning into a holding company Target Price (Dec'25) 115.8
The base plant’s Power Purchase Agreement (PPA) has been terminated, and Narowal Last Closing 110.8
Energy Limited (NEL) and Laraib Energy Limited (LEL) are among 18 Independent Upside (%) 4.5
Power Producers (IPPs) whose PPA status is expected to shift from “take or pay” to Shares (mn) 1,297.2
“take and pay.” HUBC holds 100% stake in NEL while in LEL its shareholding is 75%. Free float (%) 75
In our base case, we have taken the NEL and LEL on a take-and-pay basis, and we Market Cap. (PKR mn) 143,686
have HOLD stance for the company with Dec’25 target price of PKR 115.8/share. Market Cap. (USD mn) 517
HUBC holds a 46.0% stake in China Power Hub Generation Company (CPHGC), a
Recommendation HOLD
60.0% stake in Thar Energy Limited, and a 38.3% stake in ThalNova, all of which are
Price Performance
power plants under the China Pakistan Economic Corridor (CPEC). In past, China has
refused to renegotiate the terms of the plants. But due to recent developments in the 3M 6M 12M
sector, we have run a sensitivity analysis considering the impacts of a reduction in Return (%) -19.9 -13.5 9.2
return on equity (RoE) and a debt moratorium. Avg. Volume (000) 12,581 9,045 6,516
ADTV (mn) - PKR 1,487 1,155 821
Exhibit: Sensitivity Analysis ADTV (000) - USD 5,351 4,154 2,942
RoE EPS (PKR) SoTP High Price - PKR 146.0 157.5 157.5
Discount FY25e FY26f (PKR)
Low Price - PKR 97.4 97.4 97.0
Base case 0.0% 41.2 34.1 115.8
Without Debt Moratorium
Case 1 0.0% 41.2 34.1 115.8
Case 2 20.0% 39.6 30.9 105.8 Others,
14%
Case 3 30.0% 38.9 29.2 100.1
FI's, 8% Indviduals
Case 4 40.0% 38.1 27.6 86.9
, 30%
Case 5 50.0% 37.3 25.9 75.1
Insurance,
With Debt Moratorium
8%
Case 1 0.0% 33.9 18.2 115.8
Modaraba
Case 2 20.0% 32.3 14.9 105.8 , Mutual
Case 3 30.0% 31.5 13.2 100.1 Funds &
Leasing, Charitbale
Case 4 40.0% 30.8 11.6 86.9 Associted
9% Trusts, 10%
Case 5 50.0% 30.0 10.0 75.1 Cos., 20%
Source (s): AHL Research Source: Company Financials, AHL Research
HUBC is transforming itself from a power generation company into a diversified

business, expanding into areas such as oil and gas exploration, electric vehicle
manufacturing, and mining. HUBC KSE100
180%
Tapped into the Oil and Gas Exploration sector
Prime International is a 50:50 joint venture between the HUBC and the Employee 160%
Buyout Group. The company is operating in Pakistan since 2000 in the exploration and
production sector. We estimate Prime International to contribute PKR 2.9bn (PKR 140%
2.3/share) in HUBC’s FY26 consolidated earnings.
120%
Partnering with world largest EV manufacturer
Hub Power Holdings Limited, a wholly-owned subsidiary of The Hub Power Company
100%
Limited (HUBC), is diversifying its investment by entering in the business of electric
May-24
Jan-24
Jun-24
Mar-24
Feb-24
Apr-24
Oct-24
Jul-24
Nov-23
Dec-23
Aug-24
Sep-24
Nov-24
vehicles, with Build Your Dreams (BYD) a leading Chinese EV manufacturer, through
its associate company, Mega Motor Company (Private) Limited. It is anticipated that
HUBC will commence the manufacturing of the EV and plug-in hybrid vehicles in 2027. Source: Bloomberg, AHL Research

2025
BYD is a publicly listed Chinese multinational conglomerate manufacturing company. BYD
is the world’s largest maker of electric vehicles. In 2023 BYD sold 1.57mn battery electric
vehicles, an increase of 73% YoY, in addition to selling 1.44mn units of plug-in hybrid
vehicles. Mega Motors has signed a supply and manufacturing agreement and technical
license agreement with BYD Auto industry. Moreover, the company has already signed
distribution agreement in Jun’24 to launch and sell BYD’s vehicle in Pakistan.
We have also prepared a sensitivity, with respect to volume and price, to showcase the
impact on HUBC.
Exhibit: Sensitivity Analysis of BYD

Cars Sales Expected Sales TP
PKR/share
(in 000) (PKR mn) Contribution
Case 1 5.0 60,000 3.7 29.6
Case 2 6.0 72,000 4.4 35.5
Case 3 7.0 84,000 5.2 41.4
Case 4 8.0 96,000 5.9 47.4
Case 5 9.0 108,000 6.7 53.3
Case 6 10.0 120,000 7.4 59.2
Expanding footprints into mining business

HUBC has expressed interest in increasing its stake in Sindh Engro Coal Mining Company
Limited (SECMC), where it currently holds an 8% share. According to a notice released
to PSX in Feb’24, HUBC has entered into a definitive agreement to acquire an additional
9.5% stake in SECMC from Habib Bank Limited (HBL). This acquisition will raise HUBC’s
total ownership to 17.5%, positioning it as the second-largest shareholder in SECMC. The
transaction is expected to positively impact HUBC’s profitability, contributing ~PKR
1,054mn annually (EPS: PKR 0.84). However, we have not incorporated it our valuations.
Moreover, The Hub Power Company Limited has formed a joint venture with Ark Metals
(Private) Limited to explore and develop mineral mines in Pakistan. Completion of this
joint venture agreement is contingent upon obtaining the necessary regulatory approvals
and consents. This partnership marks a strategic step for HUBC and is expected to
favorably affect the profitability of the company.
Exhibit: Key Ratio

2024a 2025e 2026f

2025

PKR mn 2024a 2025e 2026f
Income Statement
Net Sales 130,462 87,739 73,092
Gross Profit 68,346 42,045 25,958
Finance Cost 26,744 15,617 8,280
Post Tax Profit 70,018 53,451 44,289
Balance Sheet
Current Assets 171,319 169,311 168,349
Total Assets 452,804 478,732 499,760
Figure: Earnings to decline due to termination of Hub base

Figure: HUBC: SoTP Valuation (Dec’25)
plant
ThalNova, EPS DPS
Narowal, (PKR)
7.9 5.6
Laraib, 4.5 60.0
54.0
TEL, 12.4 SECMC,
3.2 50.0
Hub (Base), 41.6
3.6 40.0 36.1
Prime 34.6
Internationa
l, 19.4 30.0
20.0
20.0
CPHGC, 59.2 11.0 11.0
10.0 8.0
-
FY24a FY25e FY26f FY27f
Source (s): AHL Research Source (s): Company Financials, AHL Research

2025
Technology &
Communication
Unveiling the path to our future

2025
Unveiling the path to our future

Technology sector potential to unveil: Pakistan’s IT sector has pivoted towards more
sustainable, long-term growth by shifting focus away from startup and venture capital
investments, which delivered mixed results in recent years. Instead, Pakistani tech firms
are now making a significant mark on the global stage, actively participating in renowned
international tech events. Notably, at GITEX Global, Pakistan was recognized as the
"Tech Destination of the Year," underscoring the country's growing reputation as a key
tech hub. Additional appearances at prominent events, including Black Hat, the USD
Conference, London Tech Week 2024, and Collision Canada, further exemplify the ▪ Tech destination of the year in
GITEX global event in UAE.
sector’s ambitions for expansion. ▪ Technology exports up by 34% YoY
in 1QFY25, supporting the countries
Government incentive to support sector growth: Recognizing the tech sector's role current account balance.
in enhancing the current account, the government has bolstered support to sustain this
momentum. Pakistani IT firms' increased engagement with MENAP and European
markets has already led to substantial gains in exports, which surged to USD 876mn in
1QFY25, a 34% YoY increase. The recent federal budget reflects this commitment, with
continued tax concessions for export services, underscoring the sector's economic
importance. Additionally, the State Bank of Pakistan (SBP) has raised the allowable
retention limit for Specialized Foreign Currency Accounts from 35% to 50%, empowering
IT firms to reinvest in growth initiatives. The recent stability in the PKR-USD exchange
rate is another positive factor, encouraging exporters to repatriate a higher proportion of
earnings, strengthening the local economy and positioning the tech sector for even
greater expansion.
MENA Expansion: BFSI Market Gains: The MENA region has become a strategic
market for Pakistan’s IT sector, especially in the Banking, Financial Services, and
Insurance (BFSI) segments. With established Pakistani IT presence in the Middle East
and Saudi Arabia, expatriates in these regions have also contributed to client growth.
Saudi Arabia, under Vision 2030, is driving rapid IT sector growth, spending increased
17.5% in CY23, the highest globally. This expansion, along with MENA’s projected IT
spending growth of 11% and 5% in CY24 and CY25, respectively, provides a robust
demand backdrop. However, key risks include potential corrections in oil prices and
geopolitical tensions, which could impact regional growth.
Smartphone segment
Domestic Production to support foreign reserves: Pakistan’s mobile phone market,
with an annual demand of around 34mn units, has witnessed a substantial shift toward
local manufacturing. This shift, which has replaced most imports with domestic assembly,
has significantly supported Pakistan’s foreign exchange reserves by reducing reliance
on imports. Only premium brands, such as Apple’s iPhone, remain primarily imported.
This local production also provides new economic opportunities, allowing manufacturers
to explore export markets and position Pakistan as a low-cost mobile manufacturing hub
in the region. This evolution in the mobile phone industry is closely aligned with
government incentives aimed at supporting domestic production and reducing the
country’s import burden.
Expansions of digital ecosystem: The demand for smartphones in Pakistan is

projected to grow at a steady annual rate of 10%, underpinned by population growth,
advancing technology, and the expansion of digital infrastructure. Pakistan's young and
tech-savvy demographic, coupled with an increasing middle class, fuels this demand.
Rising smartphone affordability, aided by government policies such as the Device

2025
Identification Registration and Blocking System (DIRBS), has made smartphones
accessible to a larger segment of the population. The expansion of 4G and the
anticipated introduction of 5G networks further strengthen demand by creating new
opportunities for connectivity and digital engagement.
Shaping Consumption Patterns Several macro trends are driving up smartphone

adoption in Pakistan, each of which deepens the mobile market’s integration with
everyday life. The growth of e-commerce has made online shopping more accessible,
requiring reliable mobile internet for transactions and communication. Remote work and
online education, both of which expanded significantly during and post-pandemic, have
underscored the need for smartphones as essential tools for work and learning.
Additionally, the surge in social media use has enhanced digital connectivity, making
smartphones indispensable for personal and professional engagement.
Policy Support and Market Expansion: Government support remains a key catalyst
for growth in the mobile segment. In recent years, the introduction of policies favoring
local manufacturing and assembly, such as DIRBS, has not only curbed smuggling and
unauthorized imports but has also incentivized local production. Additionally, by
encouraging investment in digital infrastructure, the government has created an
environment conducive to increased smartphone penetration. This government support
aims to reduce dependency on imports while fostering a stronger digital ecosystem that
supports job creation and economic development within Pakistan.
Figure: Historical trend of technology exports Figure: Historical trend of volumetric sales
(USD mn) Technology Exports YoY (RHS) Volumetric sales (units) YoY (RHS)
45.0 50%
350 68%
310 332 40.0 40%
306
310 51% 35.0 30%
303 298 298 292
286
259 265 257 30.0 20%
270 238 34%
25.0 10%
206
20.0 0%
230 17%
15.0 -10%
190 0% 10.0 -20%
5.0 -30%
150 -17%
- -40%
Jul-24
Dec-23
Jan-24
Apr-24
Jun-24
Sep-23
Oct-23
Nov-23
Mar-24
Aug-24
Sep-24
Feb-24
May-24
CY20
CY21
CY22
CY23
CY24e
CY25f
CY26f
Source (s): SBP, AHL Research Source (s): PTA, AHL Research

2025
Systems Limited (SYS) SYS

Expansion in MENA to strengthen Summary Data
We anticipate SYS Limited will maintain a robust USD-denominated revenue growth Last Closing 510.2
of over 7% annually for the next five years, with gross margins stabilizing above 25% Upside (%) 29.6
after recent volatility. The company's strategic expansion into the MEA region has Shares (mn) 291.8
significantly boosted revenue but initially pressured margins due to increased non- Free float (%) 60
billable fixed costs, including foreign-based hiring. However, SYS’s refined focus on Market Cap. (PKR mn) 148,872
high-growth markets like Saudi Arabia is expected to improve margins as the Market Cap. (USD mn) 536
company begins monetizing recent investments and captures higher-value
contracts. Recommendation BUY
Price Performance
Balancing Expansion and Profitability
3M 6M 12M
As of 3QCY24, SYS’s stock has underperformed the KSE-100 Index, weighed down
by margin contraction and currency appreciation. However, with expectations of Return (%) 19.2 28.1 19.0
moderate PKR-USD depreciation and a notable recovery in margins, SYS’s Avg. Volume (000) 409 456 422
fundamentals appear poised for improvement. After a challenging period of ADTV (mn) - PKR 181 200 181
aggressive investment in regional and HR expansion, SYS is now rebalancing its ADTV (000) - USD 651 719 649
strategy to concentrate on organic growth within the MEA market (Saudi Arabia in High Price - PKR 557.9 557.9 557.9
particular) while moderating fixed costs, including HR and other overheads, to
Low Price - PKR 405.4 388.8 365.2
sustain profitability.
Driving Regional Growth Shareholding Pattern

The MEA region offers significant growth opportunities for SYS, particularly with the Others,
12%
Saudi Vision 2030 initiative emphasizing economic diversification and digitization. Directors,
Ex- 27%
This pivot has contributed to MEA accounting for 58% of SYS’s revenue (compared employee
s, 8%
to 22% from North America), though it initially led to lower margins due to rapid
scaling costs. In 2023, Saudi Arabia’s IT spending increased by 17.5%, the highest
globally, and is expected to grow at around 11% and 5% in 2024 and 2025, Foreign,
respectively, according to IDC. SYS’s acquisitions of Treehouse and NDC Tech have 16%
been timely, strengthening its market share in the BFSI sector, which mirrors global
Individuals
trends where BFSI accounts for around 12% of total IT spending with a CAGR of , 20%
Companies,
10.5%. 17%
Focused Growth on Core Markets and High-Value Services Source: Company Financials, AHL Research
After experimenting with multiple geographies, SYS is consolidating its efforts in core
areas, primarily the MEA region, to leverage its established expertise. By partnering Relative Performance
closely with tech giants like Microsoft and SAP, SYS aims to stay agile and SYS KSE100
180%
responsive to shifts in the global IT landscape. The company has expanded its
service offerings in high-growth areas such as AI, cloud computing, and 160%
cybersecurity, supported by a growing foreign-based workforce, which now
constitutes around 40% of total employees. Moving forward, SYS plans to focus on 140%
securing high-value clients, leveraging its strong portfolio to target premium
120%
customers rather than casting a wide net, as it did previously.
100%
80%
May-24
Jan-24
Jun-24
Mar-24
Feb-24
Jul-24
Apr-24
Oct-24
Nov-23
Dec-23
Aug-24
Sep-24
Nov-24

2025
Exhibit: Ratio analysis
CY24e CY25f CY26f
Price to earning x 19.18 15.41 13.58
Return on equity % 19.4% 21.5% 19.8%
Return on asset % 13.5% 15.3% 14.7%
Exhibit: Key financial highlights

PKR mn CY24e CY25f CY26f
Income Statement
Revenue 66,102 77,131 89,442
Gross Profit 16,031 19,682 22,872
Finance Cost 558 542 470
PAT 7,790 9,641 10,946
Balance Sheet
Current Assets 41,811 52,955 65,673
Total Assets 57,907 68,101 80,392
Figure: PAT and Net Margins Figure: EBITDA and Gross Margins
(PKR mn) PAT Net margins (RHS) (PKR mn) EBITDA Gross margins (RHS)
11,000 32.0% 14,000 38%
9,000 26.0% 11,600 34%
7,000 20.0% 9,200 31%
5,000 14.0% 6,800 27%
3,000 8.0% 4,400 24%
1,000 2.0% 2,000 20%

CY21a
CY22a
CY23a
CY24e
CY25f
CY26f
CY21a
CY22a
CY23a
CY24e
CY25f
CY26f

2025
Air link Communication Limited (AIRLINK) AIRLINK

Summary Data
Shaping the future
Our investment thesis for Airlink is anchored on four primary factors: i) affordable Last Closing 127.7
price range to drive locally assembled phone demand ii) rising smartphone Upside (%) 35.4
adoption, spurred by population growth and technological advancements, iii) local Shares (mn) 395.3
assembly of Xiaomi TVs reflecting the company’s expanding product portfolio and Free float (%) 25
revenue diversification and iv) significant export potential. We project the company Market Cap. (PKR mn) 50,476
to generate a 4-year forward earnings CAGR of 28%. Currently, the stock is Market Cap. (USD mn) 182
trading at an attractive FY25 / FY26 PE(x) of 8.0x / 7.6x as compared to its last 3-
yr avg PE(x) of 9.9x Recommendation BUY
"Made in Pakistan" Vision: Transforming Local Assembly
Price Performance
The government’s initiative to promote local mobile assembly has driven 3M 6M 12M
remarkable success, with 93% of domestic demand met through local production Return (%) -6.4 78.0 179.1
in 2023. Central to this shift has been the Device Identification Registration and Avg. Volume (000) 6,231 7,287 8,079
Blocking System (DIRBS), which discourages imports through added duties and ADTV (mn) - PKR 862 838 704
limits smuggled devices, making locally assembled phones more accessible and ADTV (000) - USD 3,099 3,011 2,522
affordable. As a leading assembler, Airlink is well-positioned to benefit, with
High Price - PKR 145.2 145.2 145.2
projected revenue growth in its assembly segment at an 18% CAGR through
Low Price - PKR 121.8 71.5 45.7
FY28.
Key Drivers of Smartphone Demand Growth Shareholding Pattern

Pakistan’s smartphone demand is expected to grow by approximately 10%
Others,
annually, supported by demographic expansion, technology adoption, and the 13%
proliferation of 4G and 5G networks. Policies like DIRBS have improved
affordability, while e-commerce, remote work, online education, and social media Individuals,
8%
further bolster demand, establishing smartphones as indispensable tools for
connectivity and digital interaction.
Foreign
Cos., 6%
Strategic Partnerships Boosting Market Reach
Airlink’s partnership with Xiaomi through its subsidiary, Select Technologies, has
enabled it to locally manufacture Xiaomi smartphones since 2022. This success Sponsors,
73%
has paved the way for new ventures, with plans underway to assemble Xiaomi
Smart TVs and explore introducing Xiaomi electric vehicles to Pakistan.
Additionally, Airlink’s recent exclusive partnership with Acer Gadget highlights its
ability to secure significant collaborations, enhancing its presence across
diversified product lines.
AIRLINK KSE100
Tapping into Export Opportunities 420%
With local production now meeting Pakistan’s ~34mn unit annual mobile demand, 380%
export opportunities are emerging for manufacturers like Airlink. While exports are 340%
not included in our base case, the upside potential is noteworthy. Exporting 300%
400,000 units could yield an additional PKR 26.7bn in revenue, with a 4% 260%
government rebate on exports further boosting EPS by PKR 5.2/share, potentially 220%
enhancing FY25 EPS by 30%. 180%
140%
100%
Nov-23
Dec-23
Nov-24
Apr-24
Aug-24
Sep-24
Oct-24
Mar-24
Feb-24
Jul-24
May-24
Jan-24
Jun-24

2025

FY 24a FY 25e FY26f
Price to earning x 7.59 8.02 7.54
Return on equity % 30.69 33.50 29.45
Return on asset % 11.42 14.39 13.68
Exhibit: Key financial highlights

PKR mn FY24a FY25e FY26f
Income Statement
Revenue 129,742 130,659 165,712
Gross Profit 9,806 10,574 13,375
Finance Cost 2,974 1,486 873
PAT 4,625 6,297 6,692
Balance Sheet
Current Assets 30,545 33,875 39,126
Total Assets 40,518 43,756 48,924
Figure: Distribution and Retail revenue Figure: Gross margins vs. Net margins
Distribution and Retail revenue Assembly segment revenue Gross margins Net Margins
(PKR mn)
180,000 12.0%
150,000 10.0%
120,000 8.0%
90,000 6.0%
60,000 4.0%
30,000 2.0%
- 0.0%
FY27f
FY23a
FY24a
FY25e
FY26f
FY28f
FY23a
FY24e
FY25e
FY26e
FY27e
FY28e

2025
Oil & Gas Marketing

Companies
Fueling ambitions

2025
Fueling ambitions
Petroleum sales to grow amid higher demand: The Pakistan oil marketing industry’s
sales have witnessed a decline of 8% YoY in FY24. However, petroleum offtake has
picked up in FY25TD, with petroleum sales volumes increasing by 2% YoY during the
4MFY25. This growth in petroleum offtake is attributed to i) a surge in demand due to
a decline in prices for MS and HSD, ii) restrictions on smuggled petroleum products
from Iran, and iii) an increase in sales of passenger cars. Product-wise, dispatches of
MS and HSD in 4MFY25 rose by 15% and 22% YoY, respectively. Consequently, we
expect MS and HSD volumes to grow by 5% year-on-year in both FY25 and FY26,
keeping in view economic growth. Currently, international oil prices are on a downward
trend due to weak demand in major economies such as the USA and China. However,
escalating tensions in the Middle East could drive oil prices upward.
Revision of OMC margins on the cards: During Oct’24, OGRA proposed a revision
in margins for OMCs and dealers to the government. The proposal was submitted after
PSO provided data on operating costs for the review and calculation of margins. The
proposed margins would increase OMC margins on MS and HSD from PKR 7.87/ltr to
PKR 9.22/ltr. Meanwhile, dealer margins on MS and HSD are proposed to increase by
PKR 1.40/ltr, bringing them to PKR 10.04/ltr. The final decision on this matter is
pending with the Federal Government. If approved, the revision in margins would have
an annualized earnings impact of PKR 11.63/share for PSO, PKR 8.36/share for APL,
and PKR 4.39/share for SHEL.
De-regulation under consideration…again: The government is once again

considering deregulating petroleum prices to attract more foreign investment in the
sector. The sector has already seen mergers and acquisitions by new foreign
companies. Currently, petroleum prices are set by the government. With deregulation,
OMCs would be permitted to determine and revise prices at their discretion,
considering factors such as fuel quality, location, and other variables. In this regard,
OGRA is still evaluating the potential consequences and developing a plan for
deregulation.
International oil groups entering the local arena: In FY24, the OMC sector
witnessed significant merger and acquisition activity. During this period, foreign
companies such as Shell Petroleum Company Ltd. exited the country by selling an
88% stake in Shell Pakistan to another foreign company, Wafi Energy Holding, in 2024.
Meanwhile, TotalEnergies, which holds a 50% stake in Total Parco Pakistan,
announced its intention to exit Pakistan and will be replaced by another international
company, Gunvor Group. Additionally, a major international oil giant, Saudi Aramco,
entered Pakistan’s retail oil distribution market by acquiring a 40% stake in Gas and
Oil Pakistan Ltd. (GO) in May’24. Following the entry of this oil giant, GO’s market
share rose to 10% in Oct’24 compared to 4% in the SPLY. Furthermore, the
government is considering to deregulate petroleum prices, allowing OMCs to set their
own prices, which is expected to attract more foreign investors to the local market.
Risk (s):
• Influx of smuggled MS and HSD
• Disruption of White Oil Pipeline (WOP)
• Prolonged delay in cargo of crude and petroleum due blockage in trade routes

2025
Figure: Industry’s Petroleum sales Figure: Market share of OMC companies
(mn Tons) MS HSD

FO Others
25.0 20%
0.7
20.0 4.1 10% 35.9%

29.6%
0.8 1.0
0.9 1.1
15.0 2.1 0.8 1.1 0% 4MFY25 4MFY24
8.9 1.0 44.8%
2.8%
6.6 6.9
10.0 6.4 6.3 -10% 7.1% 50.1%
10.4%
3.3%
5.0 8.9 -20% 7.3%
7.4 7.1 7.5 7.9 8.8%
0.0 -30%
FY22a FY23a FY24a FY25e FY26f PSO APL SHEL HASCOL Others
Source (s): OCAC, AHL Research Source (s): OCAC, AHL Research
Figure: Average OMC margins Figure: MS & HSD ex refinery price in relation to oil price
Average OMC margins Growth MS HSD Arab Light Price
(PKR/liter) (PKR/liters) (USD/bbl)
12.0 60% 600 100
10.0 50% 500 90
8.0 40% 400 80
6.0 30% 300 70
4.0 20% 200 60
2.0 10% 100 50
- 0% 0 40
FY22a FY23a FY24a FY25e FY26f FY20a FY21a FY22a FY23a FY24a
Source (s): OGRA, AHL Research Source (s): OGRA, AHL Research

2025
Pakistan State Oil Company Limited (PSO) PSO

Summary Data
Influx of liquidity amid gas price revision
Production and market share Last Closing 247.5
During 4MFY25, PSO’s white oil sales decline by 10% YoY 2.01mn tons (MS 1.04mn Upside (%) 46.2
and HSD 0.97mn tons) compared to 2.23mn tons while market share drastically Shares (mn) 469.5
declined to 44.8% from 50.1% in 4MFY24 on the back of i) higher import of HSD Free float (%) 45
resulting in pile of stock, and ii) increase in competition post entry of new foreign oil Market Cap. (PKR mn) 116,195
giant. We expect the sales of PSO to climb up in the latter half of the ongoing fiscal Market Cap. (USD mn) 418
year, taking FY25 white oil sales to 6.93mn tons. Whereas, in FY26, we foresee the
white oil sales of PSO to arrive at 7.39mn tons. Recommendation BUY
RLNG Circular Debt curtailed Price Performance
The Govt's efforts to reduce gas circular debt by revising gas prices and eliminating 3M 6M 12M
subsidies have started to pay off, as overdue receivables have witnessed a decline Return (%) 65.0 45.2 77.9
over the past two quarters. As of Sep’24, overdue receivables decreased by PKR Avg. Volume (000) 3,387 2,289 2,833
3bn to PKR 417bn compared to PKR 420bn in Jun’24. A significant portion of these ADTV (mn) - PKR 726 467 534
overdue receivables is owed by SNGP, amounting to PKR 275bn in Sep’24 (PKR ADTV (000) - USD 2,614 1,682 1,905
286bn in Jun’24). Consequently, the company’s trade debts stood at PKR 468bn in
High Price - PKR 249.4 249.4 249.4
Sep’24 (Jun’24: PKR 488bn). Reflecting this reduction in receivables, the company’s
Low Price - PKR 148.5 147.4 134.4
short-term borrowing also declined, falling to PKR 397bn in Sep’24 (Jun’24: PKR
404bn). It is important to note that PSO supplies RLNG to the industrial sector, which
is redirected to the domestic sector during winter, leading to an increase in price
differentials. Therefore, the higher Gas Development Surcharge, along with fixed Others,
23% Govt. of
charges (raised in the 2023 gas tariff hike), could support the government reduce Pakistan,
circular debt within the RLNG chain and may be used to offset the price differential. 22%
Profitability to arrive at PKR 62.69/share in FY25

Insurance,
In FY24, PSO faced significant inventory losses due to a decline in international oil 9.17% FI's, 11%
prices. However, the company’s profitability increased, supported by higher other
income, as financial charges on line-fill costs of PKR 8.6bn were recorded. We
Modaraba
anticipate average oil prices to be around PKR 77/bbl and 70/bbl in CY25 and CY26, & Mutual Indviduals,
respectively. Additionally, a revision in OMC margins of PKR 1.35/ltr is expected Funds, 21%
14%
soon, which would have an annualized impact of PKR 11.6/share on earnings growth.
Moreover, economic growth and ongoing monetary easing are supporting auto sales
and petroleum demand, which is expected improve company’s topline. Meanwhile,
higher receivable collections are improving the company’s liquidity position, resulting
in a downward trend in short borrowings, according to the latest accounts. As a result, 200% PSO KSE100
the company’s financing costs are expected to decline. Consequently, we project

180%
FY25 and FY26 earnings to reach PKR 62.7/share and PKR 82.0/share, respectively.
160%
Other developments
During FY24, the company completed the development of new storage facilities 140%
totaling 91k tons at Faqirabad, Faisalabad, and Mehmoodkot, bringing it to 1.24mn
120%
tons. With this expansion, PSO is targeting to open 1,500+ new retail stations across
Punjab and KPK. Furthermore, PSO has established a direct connection from the 100%
Zulfiqarabad Oil Terminal to the White Oil Terminal Station (WOTS-1), bypassing the 80%
May-24
Jan-24
Jun-24
Mar-24
Feb-24
Apr-24
Oct-24
Jul-24
Nov-23
Dec-23
Nov-24
Aug-24
Sep-24
FOTCO header. Not only this will enable direct MS and HSD supply to the WOP, but
also reduce costs and enhance the storage capacity of the terminal. Meanwhile,
during FY25TD, PSO signed a long-term LPG supply agreement with UEP, which
increased LPG allocation by 25%. Additionally, three lubricant tanks with a total
capacity of 3,000 tons at the Keamari Terminal B and LMPA facilities have been restored.

2025
Exhibit: Key Ratios

FY24a FY25e FY26f


PKR mn FY24a FY25e FY26f
Income Statement
Net Sales 3,571,750 3,128,809 3,420,235
Gross Profit 97,291 131,953 145,369
Finance Cost 52,338 40,430 40,534
Post Tax Profit 15,863 29,433 38,514

Balance Sheet
Current Assets 906,322 852,900 905,321
Total Assets 974,449 926,069 985,027

Figure: PSO receivables from SNGP in relation to RLNG sales Figure: PSO’s white oil sales
(PKR bn) SNGP Receivable RLNG Sales (PKR bn) (mn tons) MS HSD
20.0
350 1,200
300 1,000 16.0

250 8.87
800
12.0
200 6.58 6.90
6.37 6.26
600
150 8.0
400
100
4.0 8.95 7.87
7.42 7.14 7.49
50 200
0 0 -
FY20a FY21a FY22a FY23a FY24a FY22a FY23a FY24a FY25e FY26f
Source (s): Company Accounts, AHL Research Source (s): OGRA, AHL Research

2025
Automobile
Assemblers
On the road to recovery

2025
On the road to recovery

Macros to improve volumes: With macroeconomic indicators pointing towards revival,
the auto assembling sector, due to its cyclical nature, is set to recover. This recovery can
be attributed to several key factor such as i) inflation coming to single digits increasing
over-all consumer purchasing power ii) lower interest rates making auto financing more
accessible, iii) the stability of currency reducing the cost of dollar-denominated raw
materials. iv) government policies promoting hybrids and EVs, which are attracting new
market entrants and v) falling fuel prices encouraging overall demand. These factors
suggest that FY25 is set to be considerably more promising than the difficulties
experienced during last 2 years. This positive trend is already reflected in the 4MFY25
auto sales, which reached 40.7K units, up by 50% YoY. We expect this trend to continue,
projecting that auto industry sales in FY25 will rise by 35% YoY, reaching ~140K units.
Figure: Volumetric auto sales
Volumetric sales YoY change (RHS)

(units)
300,000 279,267 81%
250,000 54%
200,000 181,397 27%

140,165
150,000 126,879 0%
112,266 103,826
100,000 -27%
50,000 -54%
- -81%
FY20 FY21 FY22 FY23 FY24 FY25f
Source (s): PAMA, AHL Research
Auto financing providing much needed support: The SBP has lowered the policy rate
by 700bps to 15% since Jun’24, offering much-needed relief to the auto financing rates.
As a result, auto financing has finally seen an increase, reaching PKR 228bn, after
experiencing a consistent decline over the past 27 months. Furthermore, with the
commencement of FY25, we have witnessed an increase in easy monthly installment
(EMI) plans offered by auto assemblers. We expect cheaper bank financing and
attractive EMI plans to emerge as a major factor to contribute to the auto assembling
sector’s volumes.
Figure: Interplay of CPI, policy rate and auto financing

Auto financing (RHS) CPI (Periof End) Policy Rate (PKR bn)
%
44.0% 400.0
37.0% 350.0
30.0% 300.0
23.0% 250.0
16.0% 200.0
9.0% 150.0
2.0% 100.0
Jul-21
Jul-22
Jul-23
Jul-24
Jan-21
Nov-21
Jan-22
Nov-22
Jan-23
Nov-23
Jan-24
Sep-21
Sep-22
Sep-23
Sep-24
Mar-21
Mar-22
Mar-23
Mar-24
May-21
May-22
May-23
May-24
Source (s): SBP, PBS, AHL Research

2025
Strengthening PKR parity to improve situation: The auto assembling sector has faced
several challenges over the past two years, largely due to the depreciation of the PKR,
which has increased dollar-denominated costs, exerting pressure on margins. However,
in FY24, the PKR showed a modest improvement of 2.7% against the USD, providing
some relief to margins. With expectations of further stability in PKR parity, the decreasing
cost of dollar-denominated imports are likely to attract new players to the sector,
increasing competition and supporting the sector’s overall recovery.
EVs and hybrids to change dynamics: The government is actively promoting hybrid
and electric vehicles in the country to mitigate fuel dependence and alleviate the burden
on the import bill. This is evident in the tax incentives it has provided within its auto policies,
which have allowed many auto assemblers like INDU and SAZEW to incorporate hybrid
vehicles in their product line to enhance their profitability. Furthermore, according to
market sources, the upcoming auto policy in FY26 will mainly focus on providing tax
incentives for EVs. As a result, many new players, such as BYD and DFML, along with
existing players like KIA have launched new electric models to benefit from these tax and
duty advantages.
Exhibit: New electric and hybrid launches

Company Vehicle Category Launch date
BYD BYD Atto 3 Electric Oct-24
BYD BYD Seal Electric Oct-24
Hyundai Hyundai Elantra Hybrid Oct-24
KIA motors KIA EV 5 Electric Oct-24
MG Motors MG HS PHEV PHEV Nov-24
Lucky Motors Peugeot 3008 Hybrid Nov-24
MG Motors MG Cyberster Electric Nov-24
Changan Changan Lumin Electric Nov-24
Cherry Chery Tiggo 8 Pro PHEV Dec-24
BYD BYD Sealion 6 PHEV Dec-24
MG Motors MG MARVEL R Electric Dec-24
Source (s): Pak Wheels, AHL Research
New EV policy on the cards: The government is set to finalize its electric vehicle policy
by the end of this year to accelerate the adoption of EVs. To address the infrastructure
challenges associated with electric vehicles, the government plans to install 40 charging
stations along motorways, as well as an additional 300 stations at key locations
nationwide. Additionally, to ensure that charging remains affordable, the government has
set a power tariff of PKR 39.75/unit for these stations. These efforts are part of a broader
strategy to promote the widespread adoption of electric mobility in Pakistan.
Competition driving consumer choices: The automotive industry is experiencing a

major shift with new competitors entering the market. South Korean brands like KIA and
Hyundai paved the way years ago, and now Chinese manufacturers, including Cherry,
Sazgar, and newer players like BYD, are gaining traction and offering consumers more
options. In response to this rising competition, INDU the only established player
introduced the Corolla Cross and now plans to launch the 12th-generation Corolla Hybrid
to strengthen its market position.
Key risks
• Rising inflation will hurt consumer affordability and shrink demand.
• Any Interest rate hike will lead to expensive auto-financing
• Exchange rate volatility affecting the cost of production.
• Delay in auto policy 2026.

2025
Indus Motor Company Limited (INDU)

Strong base
INDU
Diverse product portfolio Summary Data
Indus motors company Limited is a leading player in the automotive industry, Target Price (Dec'25) 2,459.7
renowned for its strong brand reputation built on durable, reliable vehicles with Last Closing 2,001.2
excellent resale value. Its diverse product portfolio, including sedans like the Upside (%) 22.9
Corolla and Yaris, SUVs such as the Fortuner and Corolla Cross, and 4x4s like Shares (mn) 78.6
the Hilux, has built strong customer loyalty and contributed significantly to Free float (%) 18
profitability. Following the launch of the Corolla Cross in Dec’23, company’s gross Market Cap. (PKR mn) 157,290
margins have risen to ~14%. Looking ahead, even with the expiration of the auto Market Cap. (USD mn) 566
policy in FY26 and end of concessionary duties on hybrids, the company is well-
positioned to sustain profitability due to its varied product range and high Recommendation BUY
localization level, offering resilience against changes in policies and market Price Performance
fluctuations, ensuring continued strong margins. 3M 6M 12M
Return (%) 22.7 31.7 111.9
High profitability despite low volumes
Avg. Volume (000) 3 12 20
In FY24, INDU reported a 56% YoY increase in profitability, with PAT reaching
ADTV (mn) - PKR 5 20 28
PKR 15.1bn. This growth was primarily driven by reduced raw material costs
driven by a favorable exchange rate, enhanced localization (ranging from 50%- ADTV (000) - USD 17 73 99
65% for Corolla, Yaris, and Cross, and 40%-50% for Fortuner and Hilux), and a High Price - PKR 2,026.5 2,026.5 2,026.5
favorable shift in the sales mix, particularly following the launch of the Corolla Low Price - PKR 1,627.9 1,500.1 940.7
Cross. Despite a 33% YoY decline in sales volumes, INDU achieved a significant
improvement in profitability with gross margins increasing to 13% in FY24, up 900 Shareholding Pattern
bps from 4.5% in FY23. With a recovery in sales volumes anticipated in FY25, the Others, 5%
Individuals,
company is well-positioned to build on this performance and drive continued 5%
growth.
Insurance, 6%
Robust cash position
INDU sits on massive piles of cash and cash equivalents (including short term Associated
Cos., 6%
investment) of PKR 83.7bn which translates to PKR 1064/share. This creates a
solid cushion for INDU and creates ample room for stunning dividend pay-outs, Foreign
new model launch and investment in capacity expansion. Also, availability of huge Investor,
78%
liquidity makes company less risky stock compared to listed peers.
Cheap Valuation
We anticipate the company's bottom-line for FY25 and FY26 to stand at PKR
237.55/share and PKR 284.06/share, respectively. This valuation positions the Relative Performance
company at a FY25 P/E of 8.4x, signifying an undervalued P/E multiple. This is
200% INDU KSE100
supported by the expectation of earnings recovery due to INDU's persistent brand
image and the new launch of the Hybrid Corolla. We recommend a buy stance on 180%
INDU with a Dec'25 target price of PKR 2,459/share, implying an upside potential
of 22.9%. 160%
140%
120%
100%
Nov-23
Dec-23
Nov-24
Aug-24
Sep-24
Oct-24
Apr-24
Feb-24
Mar-24
Jul-24
May-24
Jan-24
Jun-24

2025
FY24a FY25e FY26f
Book value per share PKR 855.3 949.8 1,063.9


PKR mn 2024a 2025e 2026f
Income Statement
Net Sales 152,481 177,759 243,344
Gross Profit 19,382 25,766 35,601
Other Income 14,269 12,947 11,569
Finance Cost 170 185 118
Post Tax Profit 14,230 18,671 22,328
Balance Sheet
Current Assets 119,420 149,539 163,964
Total Assets 145,820 180,698 193,087

Figure: Sales volumes and Gross margins Figure: PAT and Return on equity
PAT ROE (RHS)
Sales Volume Gross Margin (RHS)
(Units) (PKR mn) (%)
80,000 20% 24,000 50.0

45.0
70,000 20,000
16% 40.0
60,000
35.0
16,000
50,000 12% 30.0
40,000 12,000 25.0
8% 20.0
30,000
8,000
15.0
20,000
4% 10.0
4,000
10,000 5.0
- 0% 0 0.0
FY20a
FY17a
FY18a
FY19a
FY21a
FY22a
FY23a
FY24a
FY25e
FY16a
FY17a
FY18a
FY19a
FY20a
FY21a
FY22a
FY23a
FY24a
FY25e

2025
Textile Composite
Facing the headwinds

2025
Facing the headwinds

Recovery in textile exports: The textile industry forms the backbone of Pakistan’s
export economy, accounting for 60% of total exports and contributing 8.5% to GDP. In
Sep’24, textile exports grew by 18% YoY to USD 1.6bn, bringing cumulative 1QFY25
exports to USD 4.5bn, up by 10% YoY. Looking ahead, demand is anticipated to
strengthen, driven by increasing wages, improved consumer spending power, and lower
pipeline inventories. Coupled with ongoing U.S restrictions on Chinese imports and rising
production costs in Bangladesh, this sets the stage for Pakistani textile exporters to
capture greater market share, with the anticipated rate cuts by the Federal Reserve and
the recovery of global economies, we expect the textile industry to rebound, leading to a
potential 8% YoY jump in textile exports in FY26.
Cotton supply and demand in Pakistan: Pakistan’s cotton demand stands at 11.0mn
bales, with a projected production of 7.0mn bales for FY25, requiring imports of around
4.0mn bales. As of 31st Oct’24, the cotton arrivals in Pakistan have dropped by 37% YoY
totaling 4.3mn bales. The contraction in cotton output is largely attributed to delays in
sowing, which stemmed from reduced farmer income on wheat. This income drops
resulted from the Punjab government’s decision not to purchase wheat at the support
price of PKR 3,099 per maund, which impacted farmers’ cash flow and planting
decisions. On a positive note, international cotton prices (Cotlook A) have significantly
declined by 9.5% YoY to USD 81.7/maund, relieving Pakistan’s textile sector from price
pressures and ensuring steady supply availability.
Elevated energy tariffs and financing costs still remains a hurdle: The textile
industry faces considerable headwinds from escalating gas and electricity tariffs, along
with increased Long-Term Financing Facility (LTFF) rates. The electricity rates went up
from 9 cents/kWh to 14 cents/kWh in FY24. Additionally, the LTFF, set at 3% below the
policy rate, has driven financing costs higher, adding strain to a sector reliant on
subsidized loans for capital investment.
Impact of Increased Taxation: In a recent budgetary shift (Budget FY25), the

government transitioned export-oriented companies from a final tax regime to a normal
tax structure. This change means that while the 1.5% export sales tax has been
eliminated, companies will now face a 39% tax on profit before tax (PBT). This
adjustment poses challenges for cash flow management and profitability, making
operational efficiency even more crucial
Exhibit: Domestic cotton production compared to imports Exhibit: Historical trend of cotton prices
(mn bales) Imports Local Prodcution (PKR/maund) Local Prices Intl' Prices (USd/lb)
24,000 110
18.0
16.0 22,000
14.0 100
20,000
12.0
10.0 18,000 90
8.0
6.0 16,000
80
4.0 14,000
2.0
- 12,000 70
Jul-24
Nov-23
Dec-23
Jan-24
Jun-24
Feb-24
Mar-24
Apr-24
Aug-24
Sep-24
Oct-24
Nov-24
May-24
FY17A
FY25E
FY10A
FY11A
FY12A
FY13A
FY14A
FY15A
FY16A
FY18A
FY19A
FY20A
FY21A
FY22A
FY23A
FY24A
Source (s): PBS, Pakistan Economic Survey, AHL Research Source (s): Business Recorder, Bloomberg, AHL Research

2025
Interloop Limited (ILP)

ILP
Dominating Pakistan’s export landscape
Summary Data
Hosiery segment to outshine Target Price (Dec'25) 77.4
Interloop, the leading textile company and a global frontrunner in the socks (hosiery) Last Closing 63.7
manufacturing sector, emerges as our top pick within the textiles industry. The Upside (%) 21.6
company operates a production capacity of 873mn pairs of socks per year through Shares (mn) 1,401.7
five vertically integrated manufacturing facilities. It serves international brands and Free float (%) 20
retailers globally, including Nike, adidas, STICHD, Target, H&M, C&A, Amazon, and Market Cap. (PKR mn) 89,233
Uniqlo. The recent acquisition of Top Circle has also helped the company expand Market Cap. (USD mn) 321
its manufacturing footprint to China. We forecast a 10% rebound in volumetric sales
within the hosiery segment for FY25, leading to an impressive projected 4-year
Recommendation BUY
CAGR of 34% in hosiery sales. Looking ahead, we expect gross margins for this Price Performance
segment to remain robust at 27% in FY25, strengthened by a decline in international 3M 6M 12M
cotton prices. Return (%) -6.4 -21.5 13.1
Avg. Volume (000) 971 1,073 860
Capacity expansion with new apparel plant
ADTV (mn) - PKR 66 76 61
Interloop’s apparel facility is setting new standards for textile manufacturing with a
fully integrated, automated process encompassing yarn spinning, fabric processing, ADTV (000) - USD 239 274 218
knitting, dyeing, garment laundry, and sewing. By FY26, annual production capacity High Price - PKR 75.4 81.3 81.3
is expected to nearly double, reaching 69.8mn pieces from 33.6mn in FY24. Low Price - PKR 62.1 62.1 55.8
Moreover, the denim garment segment, currently producing 7mn pieces annually,
is also on track for expansion to 1.5mn pieces per month by 2026. Shareholding Pattern
Foreign Others,
Leading export growth 4%
Cos., 2%
As one of Pakistan’s largest and fastest-growing textile exporters, Interloop
consistently outpaces industry growth. Ranking first among listed companies and Modaraba…
second among all textile firms in the country, Interloop achieved a substantial 33%
revenue growth from FY19 to FY24, compared to the sector average of 11%. With
Individuals
USD 529mn in export sales, the hosiery business remains the key driver, Directors,
, 19%
CEO,
contributing 74% of total revenue. Spouse &
Others,
Sustainability driven future 72%
Towards the end of FY26, the revenue of ILP is expected to touch USD 700mn.
Interloop is a pioneer in sustainability, becoming the first large enterprise in Source: Company Financials, AHL Research
Pakistan’s manufacturing sector to have its science-based targets approved. The
company is expanding its renewable energy portfolio, aiming to increase solar Relative Performance
capacity to 25MW by FY26, up from the current 12.6MW. Furthermore, Interloop is
180% ILP KSE100
enhancing its clean energy initiatives with a biomass boiler for steam generation
and a water recycling facility at its Apparel Park. These investments highlight
Interloop’s commitment to environmentally responsible growth. 160%
140%
120%
100%
May-24
Jan-24
Jun-24
Feb-24
Mar-24
Apr-24
Oct-24
Jul-24
Sep-24
Aug-24
Dec-23
Nov-24
Nov-23

2025
FY24a FY25e FY26f
Earnings per share* PKR 11.8 6.2 12.0
Net Margins % 10.4 4.5 7.5
Source (s): Company Financials, AHL Research, *@1,401mn shares

Income Statement FY24a FY25e FY26f
Net Sales 158,183 195,061 223,117
Gross Profit 44,166 44,546 54,382
Finance Cost 10,156 8,895 7,685
Post Tax Profit 16,511 8,741 16,807
Balance Sheet FY24a FY25e FY26f

Trade and other Payables 23,727 29,259 33,468
Current Assets 87,217 95,826 99,211
Total Assets 146,987 155,762 158,923
Exhibit: Payout ratio (trend and forecast) Exhibit: PAT Trend and forecast
EPS DPS Payout Ratio (RHS)
(PKR) (PKR bn)
16.0 45% 24.0

14.4
13.8 20.2
14.0 40% 21.0
11.8 12.0
12.0 35% 18.0 16.5 16.8
30%
10.0 15.0
12.4
25%
8.0 12.0
6.2 20% 8.7
6.0 5.0 5.0 9.0
4.5 15%
4.0
4.0 6.0
2.5 10%
2.0 3.0
5%
- 0% -
FY22a FY23a FY24a FY25e FY26f FY22a FY23a FY24a FY25e FY26f

2025
Alpha Stocks

2025
GlaxoSmithKline Pakistan Limited (GLAXO)

GlaxoSmithKline Pakistan Limited (GLAXO) is engaged in the manufacturing and
marketing of specialty pharmaceuticals and ethical products. The company has
partnered with Marham, a leading health-tech platform, expanding its digital outreach to
healthcare professionals across Pakistan. GLAXO’s product portfolio is skewed toward
essential medicines, comprising approximately 60% of its sales mix, with the remaining
40% in non-essential products.
Following a recent price increase for essential medicines under the "hardship" category,
including flagship brands such as Augmentin, Amoxil, and Zantac, GLAXO reported
significant margin expansion in 2QCY24, reaching 24% compared to just 4% in the same
period last year. This margin improvement reflects effective price pass-throughs,
strengthened by strong demand across its essential portfolio.
The company recorded 9MCY24 earnings at PKR 11.25/share and is expected to close
CY24 with an earnings of PKR 17.2/share. With full impact of deregulation of non-
essential medicines and better margins, GLAXO's CY25 earnings are projected at PKR
26.5/share, yielding a P/E multiple of 12.1x as compared to pharma average P/E of 16.8x
GLAXO
Last Closing 316.7
Shares (mn) 318.5
Market Cap. (PKR mn) 100,858.6
Market Cap. (USD mn) 363.1

Price Performance
3M 6M 12M
Return 134.2% 130.7% 287.5%
Average Volume (000) 679.2 396.2 277.5

ADTV (mn) - PKR 140.9 79.6 47.1
ADTV (000) - USD 506.8 286.4 169.2

High Price - PKR 324.34 324.34 324.34
Low Price - PKR 155.75 121.01 77.20

Key Financials
2022 2023 LTM
Earnings Per Share PKR 7.73 1.68 14.15
Dividend Yield % 0.0% 0.0% 0.0%
Return on Equity % 12% 2% 19%
Source (s): Company Financials, Bloomberg, AHL Research

2025
Shifa International Hospitals Limited (SHFA)

Shifa International Hospitals Limited is engaged in establishing and running medical
centers and hospitals across the country. SHFA developed its maiden hospital in
Islamabad in 1993, followed by establishment of hospital in Faisalabad (2011) and
another hospital in Islamabad in 2011. Alongside, the company manages its own medical
centers, pharmacies and lab collection points in various cities. SHFA also offers kidney,
liver, bone marrow, liver and cornea transplant services. Since its inception, the company
has completed over 350 bone marrow, 700 kidneys and 1,100 livers and 287 corneal
transplants. In addition to this, the company is able to perform stem cell transplant.
Additionally, Shifa has extended its gastroenterology offerings by creating new revenue-
generating clinical spaces, including eight consultation rooms and a comfortable waiting
area for 35 individuals. Reinforcing its commitment to sustainability, Shifa has installed
a 900KW PV solar system, significantly reducing energy costs while repurposing heat
from generators via waste heat recovery boilers to minimize gas emissions. Shifa's
recent strategic expansions have positively impacted profitability, with EPS rising by 70%
YoY to PKR 10.1. Looking ahead, FY25 earnings are projected at PKR 44.2/share, which
translates into an attractive forward PE multiple of 8.5x as compared to its last 5-yr
average P/E of 14.2x.
SHFA
Last Closing 370.65
Shares (mn) 63.2
Price Performance
3M 6M 12M
Return 181.1% 170.6% 187.7%
Average Volume (000) 113.51 69.76 42.87
ADTV (mn) - PKR 23.67 13.91 8.03
ADTV (000) - USD 85.16 50.02 28.82
High Price - PKR 375.03 375.03 375.03
Low Price - PKR 125.41 125.41 125.41
Key Financials
2023 2024 LTM
Earning Per Share PKR 18.69 21.55 25.27
Source (s): Company Financials, Bloomberg, AHL Research

2025
Tariq Glass Limited (TGL)

TGL is engaged in manufacturing and distribution of glass containers, opal glass, float
glass, and tableware under well recognized brands, such as Toyo Nasic, Omroc, and
Nova, which are exported. In FY24, tableware operations reached full capacity, while full-
scale float glass production was delayed until construction sector demand improves. This
segment contributes about 64% of revenue.
TGL acquired 50% stake in MMM Holding Pvt Ltd during FY24, which holds an 84%
stake in Balochistan Glass Limited (BGL), which has expanded its portfolio into
pharmaceutical bottles. Post-acquisition, BGL’s Unit-1 plant in Hub, Balochistan,
resumed commercial operations in Jun’24.
Keeping in view high cost of power and fuel, TGL added 2.5 MWh of solar capacity,
raising total solar generation to 3.5 MWh, which has resulted in enhanced gross margins.
During FY24, the company’s profitability increased to PKR 25.41/share (PKR
22.05/share ex-bargain purchase gain) from PKR 14.63/share in SPLY. With economic
stability and better margins from reliance on solar power, TGL's FY25 earnings are
projected at PKR 21.50/share, yielding a P/E multiple of 6.0x
TGL
Last Closing 130.59
Shares (mn) 172.2
Price Performance
3M 6M 12M
Return 16.1% 14.4% 39.9%
Average Volume (000) 294.05 300.16 404.13
ADTV (mn) - PKR 34.39 34.86 44.12
ADTV (000) - USD 123.71 125.33 157.48
High Price - PKR 132.86 132.86 132.86
Low Price - PKR 108.09 105.72 87.89
Key Financials
2023 2024 LTM
Source (s): Bloomberg, PSX, Company Financials, AHL Research

2025
Pak Elektron Limited (PAEL)

Pak Elektron Limited (PAEL) offers a strong investment opportunity as a leading
manufacturer and distributor of electrical equipment and consumer appliances. The
company operates through two main divisions:
Appliance Division: This division contributes ~58% to total revenue and provides a wide
variety of products such as refrigerators, air conditioners, washing machines, microwave
ovens, LED TVs, and other household appliances. The appliance segment's growth is
driven by addressing the product penetration gap, rapid urbanization, and improving
lifestyles, ensuring robust fundamentals. With improving macroeconomic conditions,
eased import restrictions, and controlled inflation, the division’s performance has
strengthened and is expected to continue driving growth as the country’s economy
undergoes further revitalization.
Power Division: Contributing around 42% to the total revenue, this division focuses on
manufacturing power transformers, distribution transformers, energy meters, switch
gears, and grid stations. The division is well-positioned to benefit from increasing
demand for electrical infrastructure driven by urbanization, lifestyle improvements, and
government initiatives to upgrade the country’s electricity transmission and distribution
networks. The rising demand from industrial growth, expanding housing, and greater
electricity consumption (due to the growing use of electrical appliances) further
strengthens the outlook for this division.
For the 9MFY24, PAEL posted earnings of PKR 2.14 per share. Full-year earnings are
expected to reach PKR 2.74 per share, with profitability projected to rise to PKR 4.11 per
share in 2025, offering an attractive forward P/E ratio of 6.3x.
PAEL
Last Closing 27.51
Shares (mn) 856.0
Price Performance
3M 6M 12M
Return 9.0% 1.4% 73.2%
Average Volume (000) 8,535.9 8,599.7 10,992.5
ADTV (mn) - PKR 252.9 249.4 284.5
ADTV (000) - USD 909.5 896.6 1,017.2
High Price - PKR 29.01 29.01 29.01
Low Price - PKR 23.61 23.61 15.88
Key Financials
2022 2023 LTM
Return on Equity % 2.9% 3.3% 5.3%

2025
Pakistan Telecommunication Company Ltd. (PTC)

Pakistan Telecommunication Company Limited (PTC), a subsidiary of e& (formerly
known as Etisalat Group), is the largest integrated Information Communication
Technology (ICT) provider in Pakistan. As the operator of Pakistan's largest fixed-line
network, PTCL offers a wide array of services, including high-speed broadband internet,
CharJi wireless internet, Smart TV (IPTV), and OTT applications like Smart Link, Smart
TV, and Touch App. Additionally, PTCL's enterprise solutions such as Smart Cloud, Tier-
3 Certified Data Centers, Managed Services, and Satellite Services support businesses
in enhancing operational efficiency and connectivity.
Ufone, a subsidiary of PTCL, provides mobile voice and data services, offering both
prepaid and postpaid plans. The company has a customer base of over 25mn. It also
holds the highest 4G net additions in the industry. Additionally, PTC has signed a share
purchase agreement to acquire 100% stake in Telenor Pakistan with cash and debt free
value of PKR 108bn. This acquisition will allow PTC to leverage synergies, significantly
expand its customer base, and enhance its network coverage, positioning the company
as a dominant player in the market.
In CY24, Telenor's EBITDA is projected to reach PKR 45.2bn. Assuming the same
profitability from Telenor going forward and depreciation expense of PKR 10bn annually
and expected interest cost of PKR 5.4bn on USD 400mn loan, the annual contribution
after tax expected to be PKR 15.8bn (EPS PKR 4.2/share).
PTC reported a consolidated loss of PKR 15.3bn (LPS: PKR 4.06) for 9MCY24, primarily
driven by substantial finance costs totaling PKR 38.7bn (PKR 10.2/share). As of Sep’24,
PTC’s long-term debt stands at PKR 106.5bn. In lieu of this leveraged position, we
estimate that a 1% reduction in interest rates could enhance PTC’s profitability by
approximately PKR 1.1bn (PKR 0.3/share), highlighting the company’s sensitivity to a
declining interest rate environment.
PTC
Last Closing 16.26
Shares (mn) 3,774.0
Price Performance
3M 6M 12M
Return 30.9% 16.8% 127.7%
Average Volume (000) 8,364.69 7,064.93 9,604.73
ADTV (mn) - PKR 141.87 115.04 168.43
ADTV (000) - USD 510.53 413.71 602.22
High Price - PKR 16.76 16.76 18.42
Low Price - PKR 11.09 11.01 6.94
Key Financials
2022 2023 LTM
Loss Per Share PKR (2.06) (3.72) (5.16)
Price to Earning x nm nm nm
Return on Equity % -21% -35% -46%

2025
AHL Universe - Recommendation Summary

Price TP Upside EPS (PKR) DPS (PKR) P/E (x) DY (%) P/B (x) RoE (%)
Code Company Stance Indices
14-Nov-24 Dec'25 (%) 2024 2025 2026 2024 2025 2026 2025 2026 2025 2026 2025 2026 2025 2026
Exploration & Production
MARI Mari Petroleum Ltd 459.0 488.2 6.4 Hold 64.4 67.0 64.4 25.78 27.00 26.00 6.9 7.1 5.9 5.7 1.9 1.7 31.6 25.2 KSE100, KSE30, KMI & MSCI
OGDC Oil and Gas Dev Co. 194.9 249.1 27.8 Buy 48.6 48.8 49.2 10.10 15.00 25.00 4.0 4.0 7.7 12.8 0.6 0.6 16.2 15.0 KSE100, KSE30 & MSCI
POL Pakistan Oilfields Ltd. 577.8 696.6 20.5 Buy 137.9 112.3 127.6 95.00 77.00 87.90 5.1 4.5 13.3 15.2 2.0 1.7 38.2 40.1 KSE100, KSE30 & MSCI
PPL Pakistan Petroleum Ltd. 152.5 195.2 28.0 Buy 42.0 42.4 43.7 6.00 10.00 16.50 3.6 3.5 6.6 10.8 0.6 0.5 17.1 15.8 KSE100, KSE30, KMI & MSCI
Commercial Banks*^
AKBL Askari Bank Ltd. 29.1 35.6 39.3 Buy 13.6 10.3 11.4 5.00 4.00 5.00 2.8 2.6 13.7 17.2 0.4 0.3 13.1 13.4 KSE100
BAFL Bank Alfalah Ltd. 67.1 82.9 26.5 Buy 29.8 24.5 26.1 8.00 8.00 10.00 2.7 2.6 11.9 14.9 0.5 0.5 20.6 19.1 KSE100, KSE30 & MSCI
BOP The Bank of Punjab 6.6 7.2 16.5 Buy 3.6 2.7 2.5 0.50 1.00 1.00 2.4 2.6 15.1 15.1 0.2 0.2 9.6 8.4 KSE100
FABL Faysal Bank Ltd. 48.1 63.1 34.4 Buy 17.3 14.2 15.5 6.00 4.00 4.50 3.4 3.1 8.3 9.4 0.6 0.5 18.6 17.9 KSE100 & KMI
HBL Habib Bank Ltd. 130.5 133.5 5.3 Hold 41.7 35.6 38.2 16.00 14.00 14.00 3.7 3.4 10.7 10.7 0.4 0.4 12.4 12.3 KSE100, KSE30 & MSCI
MCB MCB Bank Ltd. 247.5 337.7 40.1 Buy 54.8 49.7 51.0 36.00 36.00 36.00 5.0 4.9 14.5 14.5 1.1 1.0 22.0 21.6 KSE100, KSE30 & MSCI
MEBL Meezan Bank Ltd. 226.4 205.2 -6.3 Sell 49.1 34.3 37.0 28.00 19.00 20.50 6.6 6.1 8.4 9.1 1.7 1.5 26.1 25.6 KSE100, KSE30 & KMI
NBP National Bank of Pakistan. 61.1 89.3 51.2 Buy 5.2 18.6 22.2 3.00 9.00 11.00 3.3 2.7 14.7 18.0 0.3 0.3 9.6 11.0 KSE100 & MSCI
UBL United Bank Ltd. 323.3 313.3 0.3 Hold 57.2 49.3 50.6 44.00 44.00 44.00 6.6 6.4 13.6 13.6 1.3 1.3 20.4 20.8 KSE100, KSE30 & MSCI
Fertilizer*
EFERT Engro Fertilizer^ 199.6 197.6 3.7 Hold 24.6 27.9 28.3 23.00 27.00 28.00 7.1 7.0 13.5 14.0 6.0 6.3 82.2 86.9 KSE100, KSE30, KMI & MSCI
ENGRO Engro Corporation^ 320.5 337.8 8.8 Hold 47.9 64.1 48.8 35.00 47.00 36.00 5.0 6.6 14.7 11.2 0.5 0.5 10.1 7.2 KSE100, KSE30, KMI & MSCI
FFBL Fauji Fert. Bin Qasim 64.0 18.5 KSE100, KSE30 & KMI
FFC Fauji Fertilizer Co. 278.2 361.5 36.2 Buy 44.9 59.3 60.9 33.50 50.00 52.00 4.7 4.6 18.0 18.7 3.9 3.4 69.3 59.9 KSE100, KSE30 & MSCI
Cement
DGKC D.G. Khan Cement Co. 85.8 108.9 26.9 Buy 1.2 9.2 12.5 - - 3.00 9.3 6.9 0.0 3.5 0.5 0.5 5.7 7.0 KSE100, KSE30 & KMI
FCCL Fauji Cement Co. 32.5 44.6 37.2 Buy 3.4 5.3 6.4 1.00 1.50 2.00 6.1 5.1 4.6 6.2 1.0 0.9 16.7 17.7 KSE100, KSE30 & KMI
KOHC Kohat Cement Co. 420.8 492.1 16.9 Buy 45.4 66.5 67.6 - - 10.00 6.3 6.2 0.0 2.4 1.5 1.3 27.4 22.3 KSE100 & KMI
MLCF Maple Leaf Cement.^ 40.5 53.9 32.9 Buy 6.6 7.1 8.3 - - 3.00 5.7 4.9 0.0 7.4 0.7 0.6 12.1 12.9 KSE100, KSE30 & KMI
LUCK Lucky Cement Ltd.^ 1,041.3 1,255.9 20.6 Buy 223.7 186.8 163.9 15.00 30.00 33.00 5.6 6.4 2.9 3.2 0.9 0.8 16.7 13.5 KSE100, KSE30, KMI & MSCI
Oil & Gas Marketing
APL Attock Petroleum Ltd. 448.4 596.5 33.0 Buy 111.1 112.8 114.3 27.50 52.50 52.50 4.0 3.9 11.7 11.7 0.9 0.9 23.4 22.2 KSE100 & KMI
HTL Hi-Tech Lubricants Ltd. 39.2 59.2 51.1 Buy (1.0) 7.8 9.1 - 2.00 4.00 5.0 4.3 5.1 10.2 0.8 0.7 17.2 17.8 KMI
PSO Pakistan State Oil 247.5 361.9 46.2 Buy 33.8 62.7 82.0 10.00 15.00 15.00 3.9 3.0 6.1 6.1 0.5 0.4 12.3 14.7 KSE100, KSE30, KMI & MSCI
SNGP Sui Northern Gas Pipeline Ltd. 88.3 112.6 27.4 Buy 17.9 22.2 24.5 5.50 4.50 5.00 4.0 3.6 5.1 5.7 0.8 0.7 22.8 21.4 KSE100, KSE30, KMI & MSCI
Automobile Assemblers^
HCAR Honda Atlas Cars (Pak) 301.2 261.6 -13.2 Sell 16.3 12.4 25.1 6.50 4.97 10.03 24.2 12.0 1.7 3.3 1.9 1.7 8.0 15.0 KSE100
INDU Indus Motor Co. 2,001.2 2,459.7 22.9 Buy 181.0 237.5 284.1 114.70 143.00 170.00 8.4 7.0 7.1 8.5 2.1 1.9 26.3 28.2 KSE100
MTL Millat Tractors Ltd. 583.7 534.0 -8.5 Sell 51.7 26.3 57.9 25.00 13.00 29.00 22.2 10.1 2.2 5.0 9.1 6.3 45.6 73.7 KSE100, KSE30, KMI & MSCI
SAZEW Sazgar Engineering Works Ltd. 1,081.8 929.1 -14.1 Sell 131.3 251.0 267.4 20.00 62.50 67.00 4.3 4.0 5.8 6.2 3.0 1.9 96.0 58.7 KSE100, KSE30, KMI & MSCI
Power Generation & Distribution
HUBC The Hub Power Company Ltd.*^ 110.8 115.8 14.5 Hold 54.0 41.6 34.6 20.00 8.00 11.00 2.7 3.2 7.2 9.9 0.6 0.5 23.0 16.2 KSE100, KSE30, KMI30 and MSCI
Textile Composite
ILP Interloop Ltd.^ 63.7 77.4 21.6 Buy 11.8 6.2 12.0 4.50 2.50 5.00 10.2 5.3 3.9 7.9 1.5 1.3 15.4 26.2 KSE100, KMI & MSCI
NML Nishat Mills Ltd. 76.0 90.9 19.5 Buy 18.1 16.5 23.6 3.00 2.50 3.50 4.6 3.2 3.3 4.6 0.2 0.2 5.0 6.7 KSE100 & KMI
Chemicals
LCI Lucky Core Industries Ltd. 1,174.4 1,382.7 17.7 Buy 120.6 131.3 152.2 40.00 50.00 50.00 8.9 7.7 4.3 4.3 1.9 1.6 23.3 22.9 KSE100 & KMI
LOTCHEM Lotte Chemical Pak Ltd.* 17.3 22.2 34.6 Buy 2.7 3.2 4.1 2.50 1.50 2.00 5.4 4.2 8.7 11.6 1.0 0.9 20.7 23.4 KSE100 & KMI
Leather & Tanneries
SGF Service Global Footwear Ltd. 78.5 93.8 19.5 Buy 5.4 7.9 9.8 4.50 6.50 8.00 10.0 8.0 8.3 10.2 2.3 2.2 23.7 28.3 KMI
Technology & Communication
AIRLINK Air Link Communication Ltd.^ 127.7 172.9 35.4 Buy 11.7 15.9 16.9 6.00 7.00 7.50 8.0 7.5 5.5 5.9 2.7 2.2 37.2 32.2 KSE100
HUMNL Hum Network Ltd.^ 15.1 19.9 32.2 Buy 2.6 2.8 3.3 - 0.50 0.75 5.5 4.5 3.3 5.0 1.3 1.1 27.1 26.6 KSE ALL
SYS Systems Ltd.*^ 510.2 661.0 30.6 Buy 26.7 33.1 36.6 5.50 6.50 7.50 15.4 14.0 1.3 1.5 3.0 2.5 21.5 19.3 KSE100, KSE30, KMI & MSCI
Source (s): Bloomberg, AHL Research, *Upside is total return, ^ Consolidated, Since AHCL, FATIMA, POWER, and ASL are our group companies, we are unab le to provide their estimates.

114
2025
List of Abbreviations
1H First Half FMCGs Fast Moving Consumer Goods NSS National Saving Scheme
National Transmission & Despatch
1Q First Quarter FO Furnace Oil NTDC
Company
9M 9 Months FTSE Financial Times Stock Exchange NY New York
ADB Asian Development Bank FX Foreign Exchange Reserves O&M Operations & Maintenance
ADR Advances Deposit Ratio FYTD Fiscal year to date OMCs Oil Marketing Companies
AHL Arif Habib Limited FY Fiscal Year OPEC Oil Producing and Exporting Countries
APCMA All Pakistan Cement Manufacturers Association GBP Great Britain Pound OPEX Operating Expense
ATA Annual Turned Around GDPg GDP growth p.a. Per annum
Avg Average GDP Gross Domestic Product PARCO Pak Arab Refinery
bn Billion GENCOs Power Generation Companies PAT Profit After Tax
bbl Barrel GEPCO Gujranwala Electric Power Company PBS Pakistan Bureau of Statistic
bcf Billion Cubic Feet GIDC Gas Infrastructure Development Cess PBV Price to Book Value
BoE Barrels of Oil Equivalent GHPL Government Holdings (Pvt) Ltd. PE Price Earning
BoP Balance of Payment Gov't Government PER Price Earning Ratio
bpd barrels per day GSP Generalised Scheme of Preferences PESCO Peshawar Electric Supply Company
Pakistan International Airline
bps Basis Points GST General Sales Tax PIAC
Corporation
CAB Current Account Balance HSD High Speed Diesel PIB Pakistan Investment Bonds
CAD Current Account Deficit IDR Investment Deposit Ratio PKR Pakistan Rupee
CAGR Compounded Annual Growth Rate IFC International Finance Corporation POL Petroleum Products Prices
CAR Capital Adequacy Ratio IMF International Monetary Fund PP Petroleum Policy
CASA Current Account Saving Account IPPs Independent Power Producers PPA Power Purchase Agreement
CEO Chief Executive Officer JPY Japanese Yen PPIS Pakistan Petroleum Information Service
CM Chief Minister KO Kerosene Oil PR Policy Rate
CNG Compressed Natural Gas KSA Kingdom of Saudi Arabia PSDP Public Sector Development Program
COD Commercial Operations Date KSE Karachi Stock Exchange PSM Pakistan Steel Mills
CPEC China Pakistan Economic Corridor LESCO Lahore Electric Supply Company PSX Pakistan Stock Exchange
CPI Consumer Price Index LHS Left hand side QESCO Quetta Electric Supply Company
CPP Capacity Purchase Price LNG Liquified Natural Gas QR Quick Response
CPPA Central Power Purchase Agency LPS Loss Per Share RDs Regulatory Duties
CYTD Calendar year to date LSM Large Scale Manufacturing REER Real Effective Exchange Rate
CY Calendar Year LTFF Long Term Financing Facility RFO Residue Fuel Oil
DAP Di-ammonium Phosphate mn Million RHS Right hand side
DISCOS Distribution Companies mb/d Million barrels per day RIR Real Interest Rate
DCF Discounted Cash Flow ME March End RLNG Degasified Liquified Natural Gas
DPS Dividend Per Share MEPCO Multan Electric Power Company ROA Return on Assets
DR Discount rate mmbtu Metric Million British Thermal Unit ROE Return on Equity
DY Dividend Yield mmcfd Million Cubic Feet Per Day SBP State Bank of Pakistan
E&P Exploration & Production MoU Memorandum of understanding SECMC Sindh Engro Coal Mining Company
EBITDA Earning Before Interest, Taxes & Amortization MPC Monetary Policy Committee SME Small Medium Enterprises
ECC Economic Coordination Committee MPS Monetary Policy Statement SOE State-Owned Enterprises
EFF Extended Fund Facility MS Motor Spirit SoTP Sum of the parts
EIA Energy Information Administration MSCI Morgan Stanley Composite Index SPLY Same period last year
EM Emerging Markets MTM Mark to Market TD To Date
Engineering, procurement, construction &
EPCC MW Mega Watts T&D Transmission & Distribution
commissioning
National Clearing Company of Pakistan
EPP Energy Purchase Price NCCPL TPA Tonnes Per Annum
Limited
National Electric Power Regulatory
EPS Earrings Per Share NEPRA UFG Unaccounted for Gas
Authority
EU European Union NFA Net Domestic Assets US United States
EV Enterprise Value NFC National Finance Commission UK United Kingdom
Ex Excluding NII Net Interest Income USD US Dollar
FBR Federal Board of Revenue NIM Net Interest Margins WAPDA Water & Power Development Authority
FIPI Foreign Investor Portfolio Investment NIR Net International Reserve YTD Year-to-date
FM Frontier Markets NPL Non-Performing Loans YoY Year-on-Year

2025
Contact list
Name Designation Email address Contact list
Shahid Ali Habib Chief Executive Officer shahid.habib@arifhabibltd.com 92 -21-3240-1930
Senior Management
Tahir Abbas Director – Equities tahir.abbas@arifhabibltd.com 92-21-3246-2742
Usman Taufiq Ahmed Director/Head – Trading & Sales usman.ta@arifhabibltd.com 92-21-3246-8285
Sana Tawfik Head of Research sana.tawfik@arifhabibltd.com 92-21-3828-0283
Bilal Khan Director – International Sales bilal.khan@arifhabibltd.com 92-21-3246-5894
Research Team
Rao Aamir Ali Deputy Head - Research amir.rao@arifhabibltd.com 92-21-3828-1106
Muhammad Iqbal Jawaid AVP - Research iqbal.jawaid@arifhabibltd.com 92-21-3828-0256
Muhammad Abrar Investment Analyst muhammad.abrar@arifhabibltd.com 92-21-3828-0264
Menka Kirpalani Investment Analyst menka.kumari@arifhabibltd.com 92-21-3246-2589
Naseem Akhtar Khattak Manager Database naseem.akhtar@arifhabibltd.com 92-21-3246-1106
Ali Muhammad Dhedhi Assistant Manager Database ali.muhammad@arifhabibltd.com 92-21-3246-1106
Equities Sales Team

Furqan Aslam Deputy Head Equities furqan.aslam@arifhabibltd.com 92-21-3240-1932
Junaid Shaharyar Godil SVP – Institutional Sales junaidsgodil@arifhabibltd.com 92 21-3246-0232
Afshan Aamir VP – Equity Sales afshan.aamir@arifhabibltd.com 92-21-3244-6256
Muhammad Kamran Senior Trader muhammad.kamran@arifhabibltd.com 92-21-3828-0229

2025
Analyst Certification: The research analyst(s) is (are) principally responsible for preparation of this report. The views expressed in this research report
accurately reflect the personal views of the analyst(s) about the subject security (ies) or sector (or economy), and no part of the compensation of the research
analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report. In addition,
we currently do not have any interest (financial or otherwise) in the subject security (ies). Furthermore, compensation of the Analyst(s) is not determined nor
based on any other service(s) that AHL is offering. Analyst(s) are not subject to the supervision or control of any employee of AHL’s non-research departments,
and no personal engaged in providing non-research services have any influence or control over the compensatory evaluation of the Analyst(s).
Equity Research Ratings
Arif Habib Limited (AHL) uses three rating categories, depending upon return form current market price, with Target period as Dec 2025 for Target Price. In
addition, return excludes all type of taxes. For more details, kindly refer the following table;
Rating Description
BUY Upside of subject security(ies) is more than +15% from last closing of market price(s)
HOLD Upside of subject security(ies) is between 0% and +15% from last closing of market price(s)
SELL Upside of subject security(ies) is less than 0% from last closing of market price(s)
Equity Valuation Methodology

AHL Research uses the following valuation technique(s) to arrive at the period end target prices;
➢ Discounted Cash Flow (DCF)
➢ Dividend Discount Model (DDM)
➢ Sum of the Parts (SoTP)
➢ Justified Price to Book (JPTB)
➢ Reserved Base Valuation (RBV)
Risks
The following risks may potentially impact our valuations of subject security (ies);
➢ Market risk
➢ Interest Rate Risk
➢ Exchange Rate (Currency) Risk
Disclaimer: This document has been prepared by Research analysts at Arif Habib Limited (AHL). This document does not constitute an offer or solicitation
for the purchase or sale of any security. This publication is intended only for distribution to the clients of the Company who are assumed to be reasonably
sophisticated investors that understand the risks involved in investing in equity securities. The information contained herein is based upon publicly available
data and sources believed to be reliable. While every care was taken to ensure accuracy and objectivity, AHL does not represent that it is accurate or complete
and it should not be relied on as such. In particular, the report takes no account of the investment objectives, financial situation and particular needs of
investors. The information given in this document is as of the date of this report and there can be no assurance that future results or events will be consistent
with this information. This information is subject to change without any prior notice. AHL reserves the right to make modifications and alterations to this
statement as may be required from time to time. However, AHL is under no obligation to update or keep the information current. AHL is committed to providing
independent and transparent recommendation to its client and would be happy to provide any information in response to specific client queries. Past
performance is not necessarily a guide to future performance. This document is provided for assistance only and is not intended to be and must not alone be
taken as the basis for any investment decision. The user assumes the entire risk of any use made of this information. Each recipient of this document should
make such investigation as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this
document (including the merits and risks involved), and should consult his or her own advisors to determine the merits and risks of such investment. AHL or
any of its affiliates shall not be in any way responsible for any loss or damage that may be arise to any person from any inadvertent error in the information
contained in this report.

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Pakistan Strategy 2025

Conquering new heights

Best for Research: ‘24 Best Brokerage House: ’23 – ‘21

Pakistan Investment Strategy 2025

Improving macros: We maintain an optimistic outlook for FY25, supported by Weight

Arif Habib Limited 2

Pakistan Investment Strategy 2025: Synopsis 2

Arif Habib Limited 3

Arif Habib Limited 4

AHL Model Portfolio shines once again

Exhibit: Proforma AHL Model Portfolio

Company Model Portfolio Weight

Arif Habib Limited 5

Arif Habib Limited 6

Population (mn) 241 Major Stock Exchange Pakistan Stock Exchange

GDP Growth (FY24) 2.52% Market Cap as % of GDP 11.1%

Fiscal Deficit (PKR bn, FY24) 7,207 Number of Stocks in MSCI FM 21

CPI Inflation (10MCY24 Avg.) 14.80% Largest Sector Banks

Policy Rate (Nov'24) 15.00% Largest Stock OGDC

External Debt as % of GDP (FY24) 23.1%

Total Debt as % of GDP (FY24) 67.7%

Source (s): PSX, SBP, MSCI, PBS, NCCPL, AHL Research

Arif Habib Limited 7

Arif Habib Limited 8

Upholding reforms amidst political challenges

PSX has demonstrated remarkable resilience in CY24TD, buoyed by improving

Such measures will be instrumental in addressing the economic challenges and

Arif Habib Limited 9

Economy pre & post elections

20% 6.00 280

Arif Habib Limited 10

Arif Habib Limited 11

▪ Focus on fiscal consolidation

▪ Pakistan plans to privatize 24 state-owned enterprises

▪ CAD for FY25e: USD 1.0bn (-0.3% of GDP).

▪ Pakistan has secured an EFF facility from the

▪ SBP is expected to end FY25 with reserves

Arif Habib Limited 12

Aiming for fiscal consolidation

Figure: Fiscal Deficit (% of GDP)

Arif Habib Limited 13

Figure: FBR Tax Revenue

Figure: Breakdown of expenditure

Arif Habib Limited 14

Domestic Debt External Debt* 100%

FY21 FY22 FY23 FY24 FY25e

Exhibit: Pakistan Fiscal Operations

Arif Habib Limited 15

Structural reforms - Strategic necessities

considered for privatization, underscoring the administration's commitment to structural

Govt Holdings (Pvt) Ltd Pakistan

Port Qasim Authority Pak. Steel Mills

Beyond privatization- Comprehensive SOE reforms: Privatization is only one

Arif Habib Limited 16

Exhibit: Pakistan - Structural Conditionality

Source (s): IMF, AHL Research

Arif Habib Limited 17

Trade dynamics and deficits

Vigilance remains concerning non-essential imports: In recent years, managing

Figure: Breakdown of imports Figure: Historical trend of imports