March 10, 2014 Pakistan Research |Economy Sector wise impact on strengthening PKR against greenback (see table on page 2) During FY14 Pakistani economy faced many problems due to exchange rate. In this tenure PKR was depreciated to ever low against USD. The depreciated PKR leaded USD to trade at ceiling price of PKR108.75/USD on 4th Dec 2013 as per the SBP data. Then central bank and ministry of finance intervene to control the exchange rate by taking feasible steps in banking system and linking minimum deposit rate to Repo rate. From Jan’14 onwards things starting to coming on track and PKR started to appreciated against USD. As per latest data it is trading at PKR 103.61/USD which is a good sign for overall economy in term of low import bill due to low cost of petroleum products imports. Appreciating PKR: Impact on key sectors: Our economy is highly sensitive to exchange rate because our most of sectors imports raw material denominated in USD. Major portion of our import bill consist of cost of oil products, which then channelized to higher production cost in major sectors. The appreciating PKR will be favourable to cut the import bill and sustaining current account deficit. The cement sector’s cost of production will decrease due to lower cost on imported coal, which may lead to a decrease in per bag selling price of cement. USD/PKR Parity 110.000 108.000 106.000 104.000 102.000 100.000 USD BUYING 98.000 USD SELLING 96.000 94.000 Source: www.sbp.org.pk 1.120 1.100 1.080 1.060 1.040 1.020 1.000 0.980 0.960 0.940 0.920 JPY/PKR Parity JPY BUYING JPY SELLING Sectors like, fertilizers, OMC and other which are carrying foreign loans in their books will enjoy exchange gain due to appreciating PKR against USD. IPPs will face decrease in revenue due to positive PKR/USD parity because their tariffs are USD denominated , but will be beneficiary due to low cost of import of Furnace Oil. The textile sector may see a hard time in export products because appreciated LCY always leads costly export products, so earnings may hamper. Analyst: Rajesh Kumar Maheshwari Tell: 111-111-721 Ext.116 www.scstrade.com Favourable PKR/USD parity for Auto sector Along with PKR/USD parity, PKR/JPY parity plays key role in different sectors mainly in auto assembler sectors. Cost of importing spare parts for autos is major cost of auto industry which is effects the gross margin of a company. The favourable PKR/JPY parity is adding value in profitability of auto assemblers which was observe in latest results of HCAR, PSMC and INDU. Disclaimer: This report has been prepared by Standard Capital Securities (Pvt) Ltd and is provided for information purposes only. The information and data on which this report is based are obtained from sources which we believe to be reliable but we do not guarantee that it is accurate or complete. Standard Capital Securities (Pvt) Ltd accepts no responsibility whatsoever for any direct or indirect consequential loss arising from any use of this report or its contents. Investors are advised to take professional advice before making investments and Standard Capital Securities (Pvt) Ltd does not take any responsibility and shall not be held liable for undue reliance on this report. This report may not be reproduced, distributed or published by any recipient for any purpose. March 10, 2014 Pakistan Research |Economy Sector Company Major trigger Impact Textile NML &NCL extent of exchange gain to come down Import of machinery lower inflated gains Positive OMC PSO gain on foreign exposure Cut in cost of improrted oil Positive Positive Fertilizers FFBL & EFERT PH3 Contracts at lower rate losses on foreign loans to decrease Very Positive Positive Cement DGKC LUCK Low cost of Coal exchange gain to lower down Positive lower inflated gains Automobiles HCAR INDU PSMC PKR/JPY parity in fovor GP margin is swelling Earnings to increase Positive Electricity KEL Decrease in Furnace Oil price Positive IPPs Overall Economy HUBC Dollar component gain to decline Cut in cost of petroleum products to help in lowering trade deficit lower inflated gains Positive Standard Capital Securities Research Desk www.scstrade.com Disclaimer: This report has been prepared by Standard Capital Securities (Pvt) Ltd and is provided for information purposes only. The information and data on which this report is based are obtained from sources which we believe to be reliable but we do not guarantee that it is accurate or complete. Standard Capital Securities (Pvt) Ltd accepts no responsibility whatsoever for any direct or indirect consequential loss arising from any use of this report or its contents. Investors are advised to take professional advice before making investments and Standard Capital Securities (Pvt) Ltd does not take any responsibility and shall not be held liable for undue reliance on this report. This report may not be reproduced, distributed or published by any recipient for any purpose.
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