Investment & Portfollio Management: Proje CT Repor TON

INVESTMENT & PORTFOLLIO MANAGEMENT
INVESTMENT & PORTFOLLIO

MANAGEMENT
PROJE
CT
REPOR
T ON
DATE OF SUBMISSION
MONDAY, JULY 05, 2010
A PROJECT
REPORT ON
SECURITY ANALYSIS
OF KSE 100 INDEX
ARMY PUBLIC COLLEGE OF MANAGEMENT &

SCIENCES, ORDNANCE ROAD, RAWALPINDI
Project Topic:
“Investment in different securities in KSE 100

Index”
Project Submitted to:
Sir Syed Waqar Akbar

Project Submitted by:
1400015 M. Asim Iqbal Kiani

1400021
DEDICATED
Zeeshan Ali Ahmed Bhatti
1400022 Suhail Munir Kiyani
1400038 Ghulam Ali
TO
1400105 Muhammad Jumshad Arif
OUR LOVING PARENTS,
Submission Date: July 05, 2010
PASSIONATE TEACHER
&
SWEET CLASS FELLOWS

ARMY PUBLIC COLLEGE OF MANAGEMENT & SCIENCES,

ORDNANCE ROAD, RAWALPINDI
Letter of Transmittal
Syed Waqar Akbar
Teacher of Investment & Portfolio Management,
Army Public College of Management Sciences
Rawalpindi
Subject: Submission of Project on “Investment in

different securities in KSE 100 Index”
Respected Sir,
We are thankful to you for assigning us the requirement of

preparing the subject project. We have endeavored to investigate
the subject and reach out to its roots.
We hope that this effort will prove to be, yet another step
towards better understanding of the subject matter, please.
Thanks and regards
Yours truly,
1400015 Muhammad Asim Iqbal Kiani
1400021 Zeeshan Ali Ahmed Bhatti
1400022 Suhail Munir Kiyani
1400038 Ghulam Ali
1400105 Muhammad Jumshad Arif
ACKNOWLEDGEMENT
First of all, we are very much grateful to Almighty Allah, the Most
Merciful Who made us capable of completing this assignment
with full dedication & devotion.
We are all thankful to our teacher of Investment & Portfolio

Management “Syed Waqar Akbar” for providing us this
opportunity to appraise our hidden potential.
At the end, we are thankful to everyone who has been helping us

consciously and unconsciously in the completion of this
assignment.
INTRODUCTION....................................................................................................8
ECONOMIC ANALYSIS.......................................................................................9
a. Gross Domestic Product.........................................................................10
b. GNP:....................................................................................................................10
c. Consumer Price Index/Inflation:........................................................10
d. Interest:............................................................................................................11
e. Per Capita income......................................................................................11
f. Exchange Rate:............................................................................................11
g. Unemployment:............................................................................................11
h. Public Debt:....................................................................................................12
i. Balance of Payment and Trade:.........................................................12
j. Foreign Direct Investment....................................................................13
k. Government Policies:...............................................................................13
l. Political Environment:..............................................................................14
m. Conclusion:.....................................................................................................14
INDUSTRY ANALYSIS......................................................................................15
Business Cycle:......................................................................................................15
1) Oil and Gas Industry.................................................................................16
2) Textile Industry............................................................................................22
3) Fertilizers Sector.........................................................................................36
4) Electricity.........................................................................................................41
INVESTMENT IN
DIFFERENT SECURITIES IN
KSE 100 INDEX
INTRODUCTION
We have been given Rs 500,000 in a hypothetical situation, in which we are to
invest this money in the security market by selecting any five different shares
of our choice in five different sectors. Before investing, we are to do a detailed
analysis in the following hierarchy:
• Economic Analysis of the country to take decision that whether it will be

beneficial to invest in the current economic conditions prevailing in
Pakistan?
• On the basis of the sector performance, level of associated Risk &

returns and investment feasibility, sector trend, Selection of 5 sectors
out of 34 sectors in KSE (Excluding mutual funds)
• Selection of 1 company from each sector on the basis of company’s past

performance, consistency in performance, expectation of growth, trend
of company, company’s policies, share prices trend, and ratios analysis
of the company
AS our main objective is to study the shares prices of the company, to check
for the Risk and return associated with the securities in which we are to
invest afterwards. Our Analysis of securities starts from 1st January 2001 to
30th October 2008. 1st January and 31st December in each year are
considered to be the opening & closing dates in each year respectively.
ECONOMIC ANALYSIS
The economy of Pakistan is the 27th largest economy in the world in terms of
Purchasing Power, and the 45th largest in absolute dollar terms. Pakistan has
a semi-industrialized economy which mainly encompasses textiles, chemicals,
food processing, agriculture and other industries. In 2005, it was the third
fastest growing economy in Asia.
The major sectors The economy has suffered in the past from decades of
internal political disputes, a fast growing population, mixed levels of foreign
investment, and a costly, ongoing confrontation with neighboring India.
However, IMF-approved government policies, bolstered by foreign investment
and renewed access to global markets, have generated solid macroeconomic
recovery the last decade. Substantial macroeconomic reforms since 2000,
most notably at privatizing the banking sector have helped the economy.
Economy of any country plays a vital role in the business conditions of that
particulars company, for the purpose of doing business or investing in the
company of any sector the economic analysis of that particular country has
the vital importance especially from the investor’s point of view. The investor
before investing would be eager to know about the country’s economic
condition and after that the industry, company and technological conditions in
that particular country. Economic analysis can be done on the behalf of
economic indicators of any country such as,
a) GDP
b) GNP
c) Inflation
d) Interest Rate
e) Exchange rate
f) Per capital income

g) Unemployment
h) Public debt
i) Balance of Payment & Balance of Trade
j) FDI
a. Gross Domestic Product
Gross Domestic Product
199 200 200 200 200 200 200 200 200 200
2009
9 0 1 2 3 4 5 6 7 8
5.4 5.8 4.0 4.6 4.7 7.5 9.0 5.8 6.8 4.1 2.0
GDP is facing many problems from past years. From 1999-2003 it showed
decreasing trend and declined. During 2004-05 value of GDP increases little
but in 2006 it decreases and rise in 2007. And then decreases the value of
GDP for 2009 is 2.
b. GNP:
Gross National Product

199
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
9
4.3 4.8 4.6 7.5 6.4 8.7 5.6 6.7 6.1 4.1 2.6
From 1999 to 2004 GNP is in increasing trend which is very good condition
for economy but from 2005 it continue to decline which was in 2009 is 2.6.
c. Consumer Price Index/Inflation:
The rat e of inflation is an important macro economic

indicator and one of the key variables most central banks around
the world scrutinize when setting their main policy rate. Containing
inflation to a sustainable level is imperative for economic growth ; it
not only protects the low and fixed income groups on the consumer side
but al so keeps the cost of doing business m enlargeable on the
production side.
Inflation has inverse relationship to the industrial growth. Our economy is

running in hyper-inflationary economy. We have to pay more for plant &
machinery required for industry and similarly we have also to pay
increasing prices for the input to the industry. Ultimately we are having a
less inflation economy or even loss making unit.
Consumer Price Index (CPI)
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
3.6 4.4 3.5 3.1 4.6 9.3 7.9 7.8 9.3 10.2 22.3
7 5
d. Interest:
Interest rates are the main determinants of investments on a

macroeconomic scale. If interest rate increases in the econmy, investor
will be less interested in doing investment. It has also direct impact on
the output.
Interest
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
13 11 14 9 9 9 9.5 10 12 14 11.5
0
Interest rate has reduced by SBP. Already stock exchange is in the crises
and investors might not invest in the stock exchange as there are fewer
returns.
e. Per Capita income
Per capita income is not the proper measurement of the welfare in any
economy because it imbeds a wide range of fluctuations behinds the
numbers.
Per Capita Income (MP US$)
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
669 733 836 921 1042 1046
From 2004 to 2009 per capita income is going upward.

f. Exchange Rate:
Our currency is linked with US $. For the last few years, it has been found
that our currency is drastically depreciated due to which we are not
earning enough foreign exchange. An analysis of such depreciation in

currency is given below.
Exchange Rate (RS.)

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
61 57.7 57.9 59.6 60.16 60.5 71.00 82
g. Unemployment:
Unemployment is one of the major problems of Pakistan. It is the root

cause of several other problems and is a result of a number of problems.
High unemployment results in wastage of resources and depression of
income. And most certainly it also effects the social and emotional life of
a person.
Unemployment
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
10.2 7.9 7.8 8.3 7.7 9 6.2 6.7 8.1 9 10.2
h. Public Debt:
Public debt refers to all debt owed directly by the government originating
from domestic and external sources. It consist of debt denominated in
Rupees as well as foreign currency.
Debt (in Billion of Rs.)
200 200 200 200

1999 2003 2004 2005 2006 2008 2009
0 1 2 7
3890 3548 3725 3510 3618 3789 4064 4363 4814 5901 7268
The debt position is going in increasing trend which is not indicating good
position of the country because it continues to increase which alerts
highly risky environment for investment.
i. Balance of Payment and Trade:

The balance of payments (BOP) means a systematic record of all the

economic transactions between residents of a country with the rest of
the world during a given period of time.
BOP and BOT (in Billion of Rs.)

200 200 200 200 200 200 200 200 200 200
1999
0 1 2 3 4 5 6 7 8 9
Export 13.3 11.7 12.9 12.8 13.5 12.5 13.0 13.0 11.8 11.7 8.9
Import 16.1 14.1 15.1 14.8 14.8 15.9 18.5 22.5 21.2 24.3 17.4
Trade
2.8 2.4 2.1 1.7 1.3 3.3 5.5 9.5 9.4 12.6 8.5
Deficit
BOP and BOT are not in good condition. Country is having continues
deficit for last two decades in this prospect.
j. Foreign Direct Investment
Foreign direct investment (FDI) has emerged as a major source of private

external flows for developing countries around the world. The developing
countries like Pakistan are able to bridge their widening savings-
investment gap through this important non-debt creating inflow. During
the last two decades countries have liberalized their FDI regimes and
pursued investment- friendly economic policies to attract investment to
maximize the benefits of foreign presence in the host economy. In many
developing countries,
FDI (in Million US $ )
200 200 200 200 200 200 200
1999 2007 2008 2009
0 1 2 3 4 5 6
5152. 3038.
1524 3521 5139.6
8 8
k. Government Policies:
Fiscal Policy:
In Pakistan, fiscal policy is being used for attaining objectives such as self
reliance, expansion of exports, containment of import of luxury and non-
essential goods, promotion of investment and reduction in income
disparity. The government intends to expand tax base, bring new areas
and sectors under the tax net, reduce dependence on custom duties and
shift it on taxes on income and consumption. Specific measures have
been taken for making assessment and collection of tax simple and
transparent in order to eliminate corruption from the tax collection
system besides reducing administrative expenditure of the government
for containing the fiscal deficit.
Monetary Policy:
State Bank of Pakistan (SBP) prepares an Annual Credit Plan. This plan
makes fund allocations for various sectors of the economy and
determines safe limits of monetary and credit expansion during the year.
Credit requirements of the private sector are accorded prior claim on
domestic credit expansion over the government sector credit
requirements. The credit plan makes sure that funds are properly
allocated to meet genuine credit requirements of all the priority
segments of the private sector
l. Political Environment:
The political environment is not stable in the country and country is

facing political crises during the past many years which indicate risk
factor in investment.
m. Conclusion:
Although the current economic condition of Pakistan is not that well but
there are few reasons which can get the interest to invest in the
Pakistan. The reasons are:
• Geo Strategic Locations
• Trained workforce
• Economic outlook
• Financial Markets.
SNAP SHOTS OF ECONOMY OF PAKISTAN
Rank 27th
Currency 1 Pakistani Rupee (PKR) Rs. = 100 Paisas
Fiscal year July 1–June 30
Trade organisations ECO, SAFTA, ASEAN, WIPO and WTO
Statistics
GDP $431.2 billion (PPP) (2008)
GDP growth 2.0% (2009 est.)
agriculture: 19.6%, industry: 26.8%, services: 53.7%

GDP by sector
(2007)
Inflation (CPI) 11.17% (2009-2010)
Population below poverty

23% ((2007))[1]
line
55.88 million (2009 est.)

Labour force
Unemployment 15.2% (2009 est.)
textiles, chemicals, food processing, steel, transport

Main industries equipment, automobiles, machinery, beverages,
construction, materials, clothing, paper products
External
Exports $17.87 billion (2009 est.)
textile goods (garments, bed linen, cotton cloths, and

Export goods yarn), rice, leather goods, sports goods, chemicals
manufactures, carpets and rugs
United States 22.4%, UAE 8.3%, UK 6%, China 15.4%,

Main export partners
Germany 4.7% (2006 est.)
Imports $28.31 billion f.o.b. (2009 est.)
Petroleum, Petroleum products, Machinery, Plastics,

Import goods Transportation equipment, Edible oils, Paper and
paperboard, Iron and steel, Tea
China 14.7%, Saudi Arabia 10.1%, UAE 8.7%, Japan

Main import partners 6.5%, United States 5.3%, Germany 5%, Kuwait 4.9%
(2006 est.)
Public finances
Public debt $50 billion (2009)
Revenues $23.21 billion (2009 est.)
Expenses $30.05 billion (2009 est.)
INDUSTRY ANALYSIS
Business Cycle:
The business cycle of Pakistan is in 2010 passing through the recession
period. The recession period started from 1990 and followed the same
negative trend. During 2005-06 & 2006-07 showed little. So, currently due
to many factors local and global factors business cycle is in its recession
state.
1) Oil and Gas Industry
The oil and gas sector has a considerable impact on the economy – the
sector attracts by far the highest level of foreign direct investments in
the country, and raises significant tax income for the government.
Pakistan has an interesting Geo-dynamic history of large and
prospective basin (with sedimentary area of 827,268 sq. km). So far
about 844 million barrels crude oil reserves have been discovered of
which 535 million barrels have already been produced.
a) THE INDUSTRY’S CONTRIBUTION TO THE GDP OF THE COUNTRY
The total contribution of gas distribution in GDP during 2008-09 was
14.7% including electricity. Separately oil and gas are not indicated in
the official documents but their contribution is estimated at around 1 per
cent. The indirect contribution of oil and gas, however, is enormous.
Investment on electricity and gas is Rs. 48 billion, constituting 10 per
cent of the total. In the oil and gas sector, an investment of Rs. 16 billion
or over 3 per cent of the total is estimated. It accounts for over 80% of
total energy supplies with an average growth rate of 6% a year.
b) The main Players of The Sector
The main players of the oil & gas sector is given below:
Refineries Oil Marketing Companies Expolaration Gas Companies
Companies
1. Attock Refinery 1. Pakistan State 1. OGDCL 1. Sui

Ltd. Oil Company Southern
2. POL
Limited Gas
2. National
Company
Refinery Ltd. 2. Attock
Petroleum 2. Sui
3. Pak-arab
Limited Northern
Refinery Ltd.
Gas
3. Bosicor
4. Pakistan Pipeline
Refinery Ltd. 4. Total-Parco

Pakistan
5. Byco Petroleum
Limited
Pakistan Limited
5. Shell,
6. Chavron,
7. Admore Gas
Limited,
8. Hascombe
Storages Pvt.
Ltd.,
9. Overseas Oil
Trading Co.,
10. Askar,
11. Pearl Parco
a) Supply & Demand of Oil

Demand 19mt/y
Supply Local Products 8.7mt/y
Imported Products 10 mt/y
Imported Crude 143,683 b/d
($ 1.362m)
Annual Import Bill $ 3,326m
b) Oil production & Consumption
c) Oil Refining Capacities
d) Pakistan Existing Refining Capacities

e) Oil Marketing Companies
PETROLEUM POLICY 2001

Salient Features
Foreign Equity 100 %
Investment No Minimum Limit
Custom Duty 5% PME (not manufactured locally)
Income tax 40% Onshore: Royalty treated as expense.
40% Offshore: Royalty treated as advance tax.
Royalty 12.5% Onshore
12.5% Offshore: (with holiday for four years and
reduced rate for next two

years)
Pre-commercial Onshore: No obligatory “carry” for GoP or

government holding company.
discovery
Post-commercial Offshore: Sliding scale production sharing

arrangements (shallow, deep, and ultra-deep grid)
discovery
Production Bonus Same as before; where recoverable reserves are

less than 5-10 MMBOE, first production bonus
would not be payable on commencement of
production.
Deep Drilling Offshore divided into shallow, deep and ultra-deep

grid; GoP share based on a sliding scale for
each of the three zones.
Pipeline Construction and E&P entities allowed to construct/operate

pipelines to uplift production
Operation
INVESTMENT POLICY FEATURES

 Equal treatment to local & foreign investors
 All economic sectors open for FDI
 Foreign equity upto 100% allowed

 No Government sanction required
 Attractive incentive packages
 Remittance of royalty, technical & franchise fee allowed
 Network of Export Processing Zones
 Export Manufacturing Zero-rated
 Bilateral Agreements :
○ Investment Protection: 47 Countries
○ Avoidance of Double Taxation: 52 Countries

BY
M.ASIM IQBAL KIANI
MBA-14A
1400015
1) Textile Industry
When we think of manufacturing industry in Pakistan , it is the textile

industry that immediately comes to mind that is playing an vital role and
position in terms of the employment generation and value added special

contribution towards the exports. The textile industry which is endowed
its strong base of raw material has started its journey from non
existence in 1947 with meager size of 78000 spindles and merely 3000
looms that is too in the unorganized sector, with only one textile unit
and it could supply 8% of the domestic demand derived from its
population of 76 million people. The industry has gone through a long
way and now possesses 443 units, 8.4 million spindles and 166000
rotors, 20,000 shuttle less looms, 200000 power looms, over 600
processing units and over 2500 garments units. The following table
shows the contribution of textile sector in the economic development of
the country.
2.1-Business cycle
2.2-No. of competitors
MAJOR COMPETITORS
 The Pakistan textile industry is facing tough competition from the Indian,
Bangladeshi and Chinese textile industries. The cost of power in Pakistan is
high as compared to that in other countries.
 Bangladesh, India and China enjoy comparatively low interest rates than
Pakistan. The prevailing rates are as following, 8.5 to 9.0 per cent in
Bangladesh, 5.25 per cent in India (market rate is 10.25 per cent, however
exemption of 5 percent is provided to the textile industry) and 5.58 per cent
in China. Meanwhile, in Pakistan, the last three to four years has seen the
interest rates to have risen more than 150 percent, to 13.25 percent.
 China has expanded textile exports from $ 39.5 billions in 1998 to $ 80.0
billions in 2003.
 Buyers are watching the global supply position & if Pakistani Entrepreneurs
are not willing to change, the buyers will shift to China which has developed
a large supply base for Textile Products.
2.3-OVERLOOK
DESCRIPTION CONTRIBUTIONS
EXPORTS 64% OF TOTAL EXPORTS (US $
4.9 BILLION)
MANUFACTURING 46% OF TOTAL MANUFACTURING
EMPLOYMENT 38% OF TOTAL EMPLOYMENT
INVESTMENT 31% OF TOTAL INVESTMENT
MARKET CAPITALIZATION 7% OF TOTAL MARKET

CAPITALIZATION
INTEREST Rs. 4 BILLION PER ANNUM
SALARIES AND WAGES Rs. 40 BILLION PER ANNUM
CONTRIBUTION TO RESEARCH & Rs. 116 MILLION PER ANNUM

DEVELOPMENT
GROSS DOMESTIC 8.5% OF TOTAL GDP

PRODUCT (GDP)
2.4-TEXTILE TARGET MARKETS
Pakistan, being the fourth largest cotton producing country provides a strong base
for development substance of textile industry in spite of tremendous growth in all
the area of textile industry, including:
 Cotton
 Ginning
 Spinning
 Processing
 Made up sector
In the organization section there are 232 listed textile companies of which 153
spinning units, 28 weaving and 51 composite units while the total number of textile
units both listed and non-listed however are 443.
Contribution in Employment:
Textile unit constitute 38% of employment generated by the manufacturing sector

while textile being largest industry has got other forward and back ward relation
where it must had played its role in generating employment in related industries
for example shipping industry will definitely by mainly depended upon textile
industry.
Target market of Pakistan can be divided in to four following categories:

2.5-TYPES OF COMPETITON
Direct Competition – Direct competition for any business includes entities that
sell similar products or services in the same target market.
Indirect Competition – Indirect competitors can be more difficult to identify. The

indirect competitor is one that sells different products or services as a primary
business but can also fill the need for your product or service.
2.6-DEMAND FACTORS
This section will do a small exercise to estimate the demand function for
the textile exports. It will test the ‘small country’ hypothesis for the textile and
clothing exports of Pakistan.
Small Country Hypothesis: demand is infinitely elastic with respect to
price. And world income has no influence on exports irrespective of the size of
the income elasticity of demand.
In order to test ‘small country’ hypothesis, a simultaneous trade model is
specified for the textile exports of Pakistan. A traditional demand function is
modeled, with price and world income, along with trade weighted real effective
exchange rate (REER) as important determinants. The purpose of including

REER is, it will serve the purpose of competitor’s price. The demand function is
modeled (in log-linear form):
log XDt = a0 + a1 log PX t + a2 log REER t + a3 log WYt + Ut … (1)
where
Xt = quantity of textile exports demanded;
PXt = price of textile exports;
REERt = real effective exchange rate;
WYt = world income.
Following is the demand function estimated for the textile exports of
Pakistan:
XD = 0.01 – 0.04 PX – 0.26 REER + 1.59 WY
(0.06) (0.08) (0.26) (0.89)
R2 = 0.07, DW = 2.52, DF = -6.05**
Where the numbers in brackets below the estimated parameters are t-statistics.
DF (Dickey Fuller) is the unit root test applied to the residuals of co-integration
equations, for testing the null hypothesis of no co-integration in the regression
equation. The value of –6.05 is significant at 1 percent, strongly rejecting the
null hypothesis of no co-integration.
This implies that there exists a stable long
run relationship between export demand and its price, real effective exchange
rate and world economic conditions. The coefficient of export price is found not
to differ significantly from zero. Thus implying infinite price elasticity of
demand for textile exports. The coefficient of world income is also not found
significant. Results are in confirmation to the ‘small country’ hypothesis: price

elasticity very low (0.04) close to zero. As a “small country” the price of textile
exports follows the world price.
Textile Policy Formulation
2.7-GOVERNMENT POLICIES
According to the government of Pakistan the following are the important policicies
regarding to textile.
1- A Textiles Investment Support Fund (TISF) will be established for

incentivizing investments in specific areas including modernization of
machinery and technology,
2- removing infrastructural bottlenecks, enhancing skills, better marketing and
use of information and communication technology (ICT). Through this fund
following initiatives will be undertaken:
Technology Up-gradation Fund (TUF):
2-. To facilitate new investments and upgradation of technology Government will
contribute part of the investment financing or part of the investment cost through
the
TUF. Under this scheme, for capital intensive projects, government will pick-up 50%
of interest cost of new investment in plant and machinery with a maximum of 5%.
For
small investments, government will contribute up to 20% of capital cost as a grant.

For this purpose, Government has kept a budget of Rs.1.6 billion in the current
financial year for this scheme. This will increase to Rs. 17 billion by 2014.
3-Infrastructure Development:
Based on the experience from textiles city and garments cities models,
Government plans to set up more such industrial estates to ensure availability of

all
industrial amenities at reasonable cost.
4- Clusters will be developed where small investors can set up their facilities. The
clusters will be provided with laboratories, product development centres, research
centres, common sheds etc.
5- With a view to bridging a major gap in compliance support will be provided for
setting up effluent treatment plants for the existing industry.
6-Schemes for common warehousing, storage and marketing facilities will also be
launched to ensure timely and cost effective availability of inputs.
7- An amount of Rs. 1 billion is being allocated this year for infrastructure
development in the areas just mentioned and all measures will be initiated on
public private partnership model.
Skills Development:
8-A comprehensive training plan will be developed to upgrade the overall pool of
skills in the textiles value chain in close consultation with the industry and will be
implemented during the next five years.
9-Facilities will be provided for audits to enhance productivity and efficient

processing.
10-Government will also support acquisition of foreign expertise in enhancing local

productivity and supervisory skills and for this purpose Government has exempted
foreign experts from income tax.
11-Government will allocate Rs. 1 billion during the current year for skill
development initiatives.
Standardization:
12-A legal framework will be developed to specify standards and testing
requirements, prescribe disclosure requirements and other matters relating to the
practices and methods relevant to the sector. This has become necessary in view
of
compliance standards imposed by major importing countries.
Zero Rating of Exports:
13-Government recognizes the principle that exports should not be taxed. Efforts
will
be made to identify all direct and indirect levies that add to the cost of doing
business
without appropriate compensation so that remedial measures can be adopted.
Rationalization of Tariff Structure
14-The principle of cascading will be implemented while ensuring adequate
protection to the local industry and removing anomalies.
Removing Regulatory Bottlenecks:
15- An extensive exercise will be undertaken covering all sub-sectors, to identify
rules, regulations, procedures, levies and other regulatory constraints that hamper
the development of the sector. Based on this exercise, appropriate measures will
be
adopted to simplify or remove such irritants.
Market Access:
16-Government will be expending concerted efforts to secure due access for
Pakistan in some of the key destinations of our exports. Preferential access as well
as FTAs in such markets will be the focus of such efforts.
Marketing Support:
17-Government will provide necessary support for branding, grading, labeling and
such other activities that would add value to the textiles chain.
Export House Scheme:
18-To initiate a process of building big export houses, Government is planning to
treat local sales of yarn and fabrics to large exporter as deemed exports. For this
purpose, small producers will get 1% drawback on levies and unadjusted taxes on
sales to the export houses. An amount of Rs. 2 billion has been budgeted for the
current year for this scheme.
Marketing Insurance Scheme:
19-Government will introduce an insurance scheme to protect our exporters

against
unforeseen losses, which may arise due to failure of the buyer, bank or problems
faced by the buyer country. A working group will be set up to develop a feasible
scheme for the consideration of the government. This scheme will help remove
uncertainties currently faced by the exporters, especially in a global markets hit by
a massive financial crisis.
Information and Communication Technology:
20-Government will also support efforts aimed at enhancing efficiency through the
use of information and communication technology in such fields as development of

websites and e-commerce platforms.
Sub-sector Initiatives
21-The policy will also focus on certain sub-sector issues from fibre to garments
including ginning, spinning, weaving, knitting, processing, fashion designs,

handloom
and handicrafts, carpets and technical textiles etc.
22- Specific schemes will be launched, mostly on public-private partnership basis,

to
upgrade and improve these sectors.
Fibres:
23-The persistent problem of contamination and trash content will be addressed
through enforcement of the standards laid down in the Cotton Control Act and
Cotton
Standardization Ordinance.
24-A comprehensive training and capacity building program will be developed to
establish a system in the private sector for grading and classifying cotton.
25-Incentives will be provided to ensure that proper premiums are paid for
increased
production of contamination free graded cotton.
Spinning:
26-Investments in rotor technology and specialized attachments like compact
spinning, lycra etc. will be encouraged along with ring spinning to attain economies
of
scale. To overcome the problems of power shortage, measures would be taken to
incentivize power generation by the mills.
Weaving and Knitting:
27-Assistance will be provided for increasing capacities, up-gradation and

defragmentation.
Cost-sharing and technical assistance will be provided to encourage Investment in

shuttle less looms, knitting and power looms sector up-gradation. Common working
sheds and clusters will be developed to ensure availability of utilities and to
encourage consolidation of non-mill sector.
Non-woven:
28-The non-woven sector is one of the emerging sub-sectors having considerable
uses in value-added products. To encourage this sector, training modules will be
developed to impart knowledge and skills.
Processing:
29-Policy will support new investments in processing industry, especially in the
processing of narrow-width fabric and knit dyeing. Up-gradation of existing

machiner and technology will also be supported.
Home Textiles:
30-Home Textiles is the first stage of high value-added products. Of late, Pakistan
has made significant advances in this area and its products are ranked amongst
the
best. However, the values realized are still low compared to those available to
other
brand names. Here the efforts will have to focus on fashion and design and
branding.
2.9-SWOT ANALYSIS
Strengths Weaknesses
Availability of Local Cotton Lack of a Strategic Plan
Availability of labor Lack of Professional Manpower
Domestic Market Old Plant and Equipment
High Cost of Operation
High Cost of Financing
Inferior Quality
Opportunities Threats
Growing Demand of Textile Products. Lack of Strategic Planning.
Share in the international textile trade High Cost of Operation.

is less than 1%. As such, Pakistan has
Multiplicity and high rate of taxation.
an enormous opportunity to increase its
market share in the global market. High Cost of Financing.
Lack of Project Financing.
Inferior Quality.
Lack of effective support from the

Government.
2.10-TECHNOLOGICAL IMPACTS
IMPACT OF CLIMATE CHANGES IN PAKISTAN
 Climate change raises serious concerns for developing countries like

Pakistan, with its tremendous social , environmental and economic impacts.
 The agricultural productivity in Pakistan will be affected due to changes in
land and water resources.
 Although Pakistan has ideal climate condition for the growth of cotton
providing a factor advantage to the textile industry, but it is also quite
vulnerable to pesticides that can lower the yield per hector.
 The textile sector is largely dependent on the supply of raw material of
agricultural sector and hence whatever happens to the agricultural sector
like floods will adversely affect the textile industry rendering it even more
vulnerable to environmental conditions.
ENVIRONMENTAL HAZARDS
 From the early days of the industrial revolution, the textile industry has been
seen as a major polluter of rivers .
 The facilities of sanitation and hygiene are available to limited urban
population.
 An estimated amount of 17.5 million tons of solid waste is generated every
year in Pakistan.
 The untreated water flows into stream rivers and irrigation canals.
 Deforestation is taking place in the country at a rapid pace.
 A large number of intermediate industrial processes are conducted through

imported chemicals that produce effluents and emit hazardous gasses.
 Textile processing is a water intensive process. Almost 1.08-0.15 m3of water
is consumed to produce one kilogram of finished fabric, translating into
1,000-3,000 million cube of wastewater generation per day against a
production of 12-20 ton/day of finished fabric.
 Currently the wastewater generated by the industry is discharged into the
local environment without any treatment that serious negative effect on the
environment.
 A wide range of chemicals are used by the processing industry for dyeing
and printing operations. These include bleaching agents, vat dyes, azo dyes,
sulphur dyes, disperse dyes and color pigments, which are manufactured by
using chemicals such as formaldehydes, hydrochloric acid, ammonia,
chromium salt, soda ash, caustic soda, sodium sulphate, sulphuric acid, etc.
 Extensive usage of these chemicals by the processing industry results in
discharge of toxic elements as effluents, which if not treated properly have
the potential to cause significant environmental degradation.
 working in a car garage or textile factory can expose a person to hazardous
chemicals, dusts, and fibers that may lead to a lifetime of lung problems if
not properly diagnosed and treated.
SOCIAL IMPACT
Textile industry is associated with some environmental issues , some of
them are:
• Large volumes of water.

• Usage of complex chemicals.
• Discharge of untreated effluent
• Water Pollution
• Air Pollution
• Labours concern
2.11-CONCLUSION
Textile Industry is providing one of the most basic needs of people and the
holds importance; maintaining sustained growth for improving quality of life. It
has a unique position as a self-reliant industry, from the production of raw

materials to the delivery of finished products, with substantial value-addition at
each stage of processing; it is a major contribution to the country's economy. It
has a vast potential for creation of employment opportunities. If Pakistan
overcomes all the problems, definitely we can back on the position stands of
Textile Market.
1) Fertilizers Sector
The fertilizer industry in Pakistan is of an oligopolistic nature.The fertilizer industry

plays an important role in the Economy of Pakistan as Pakistan is an agricultural base
country which depends heavily on the agriculture.
BUSINESS CYCLE
The business cycle in Pakistan Since 1950 is been fluctuating and its been different
trends and changing from time to time and in current situation it is going to be at the
increasing trend.
INDUSTRY LIFE CYCLE
The Fertilizer industry is in expansion stage in Pakistan. Still there are a lot of new
companies being established. There are very few barriers to the entry in this industry.
We can say it’s a good chance for investors to invest in this industry to start up and
there are not that many difficulties in this industry as compared to few others.
COMPETITORS
The Fertilizer Industry of Pakistan is the main industry which is contributing effectively
to the economy of Pakistan. There is a competition among four major companies in the
industrial sector of Pakistan.
These Four main companies
Engro
FFC
FFBL
Dawood Hercules
Few other companies are also doing their in this particular industry but they
haven’t have make remarkable effect in this industry yet. The companies have the
significant effect on the overall Economy of the Country. As per previous point the
trend in the industry is growing due to the chances of more expansions in the industry.
MARKET SHARE
The market share of the companies in the fertilizer sector is given below and there is
also a pie chart which can give a graphical look on the market share of these
companies
Engro (20% of total urea production)

FFC (45% of total urea production)
FFBL (13% of total urea production)
Dawood Hercules (11% of total urea production)
Others (11% of total urea production)
This pie chart shows the market share of the companies which are operatig n this
particular sector. The others represent the other companies which are in the fertilizer
industry.
The two other companies are Pak American and Pak Arab companies both with
11% of total urea production of Pakistan. The bar chart shows the market share of the
companies.
TYPES OF COMPETITION
There are two types of competitions in the market
Direct
Direct competition for any business includes entities that sell similar products or
services in the same target market.
Indirect
Indirect competitors can be more difficult to identify. The indirect competitor is one that
sells different products or services as a primary business but can also fill the need for
your product or service
In this industry the type of competition is the direct competition as for any
Company includes entities that sell similar products or services in the same target
market
UREA PRODUCTION CAPACITY
The total urea capacity of total industry and its company and also the capacity
utilization of the companies is given in the table below.
Manufacturer Urea Capacity Capacity Utilization

FFC 1,904,000 118%
Engro 850000 107%
FFBL 551,100 105%
Dawood Hercules 445,500 91%
Pak American 350,000 100%
Pak Arab 92,400 124%
TOTAL 4,193,000 110%
DEMAND AND SUPPLY

The market demand for urea during the nine months ended September 30, 2009, was
4.7 million tons, an increase of 18% over the same period of last year (4.0 million tons).
The increase is attributable to two major reasons, which are, better farm economics for
wheat, which led to increased sowing and sowing of BT cotton which requires greater
application of urea over conventional cotton varieties. Domestic production at 3.74
million tons was almost the same as compared to 3.73 million tons during the same
period last year.
The market demand for urea, during the first quarter of 2009 was 1.55 million
tons, showing an 11% increase over the first quarter of 2008 with demand at 1.4 million
tons. The enhancement in demand is attributed to an improved farm economics for
wheat, which has led to an increased sowing and also improved urea application.
Domestic production 1Q09 was 1.16 million tons, which was 3% lower as compared to
1.2 million tons during the same period last year.
International urea prices declined during the period and on average the landed
price of imported urea was approximately Rs 1,210 per bag ($300/ton) against the
prevailing average domestic price of Rs 670 per bag. Industry-wide sale of phosphatic
fertilizers increased by over 100% to 0.2 million tons as compared to 0.1 million tons
for the same period last year. Low phosphatic fertiliser prices kept the demand high.
In 2008 with industry urea sales standing at 5.5 million tons, posting a 12%
growth over 2007 despite acute shortages. This growth was attributed to (a) negative
growth of 6.2% in 2007 vs 2006, (b) lesser application of phosphatic fertiliser and
related market uncertainties, (c) Increase in area under BT cotton requiring more urea.
With an industry of 5.5 million tons, this translated in 5-year CAGR of 4.2% and 10-
year CAGR of 3.5%, respectively.
Domestic urea production was 4.98 million tons, 5% higher than 2007.
Additionally, TCP imported 0.44 million tons. Price differential between local and
imported urea persisted with local urea being provided at a relatively lower cost so as
to pass on the benefit to the farming community. Net benefit worth Rs 147 billion was
passed onto the local farmers out of which Rs 34 billion was owing to the subsidy given
by the government.
Domestic fertilizer industry witnessed positive trend in production during the

year under review. The production in nutrient terms increased from 2906 thousand
tones during 2008‐09 to 3024 thousand tonnes during 2009‐10 showing an increase of
4.1 per cent. Nitrogen production was 2611 thousand tonnes during 2009‐10 and
recorded an increase of 3.2 per cent (86.3 per cent in total nutrient production),
phosphate 403 thousand tonnes (13.3 per cent share in total nutrient production),
which increased by 10.7 per cent. Potash blends production was bout 10 thousand
tonnes and was almost same as in previous year (0.3 per cent share in total nutrient
production).
The subsidy on phosphate and potassic fertilizers was eliminated on 31st

December 2008. However, from January, 2010, the Government of Pakistan (GOP)
initiated a new scheme of subsidy amounting to Rs. 500 per bag of 50 kg for potassic
fertilizers only. For 2009‐10, the subsidy on potassic fertilizers has been estimated as
Rs. 0.5 billion. Along with this, the subsidy on imported Urea by picking the difference
over its local price (for price stabilization purpose) continued for 2009‐10. On flip side,
imported Urea as cost the GoP in 2009‐10 at least Rs. 1400 per bag, while, the total
subsidy on imported Urea is estimated as about Rs. 14 billion for 2009‐10. In addition
to this, the Government is also providing an indirect subsidy to fertilizer manufacturers
by selling feedstock gas (80% of the raw material cost) at approximately 50 per cent
lower rates as compared to the price for commercial users.
TECHNOLOGICAL IMPACTS
The technology is improving day by day and lots of new and modern techniques
are making the work easier in almost all the aspects of life, same is the case of this
particular industry lots of new methods are introducing and making the work more
efficient and effective as the advancement in the technology occurs more the work is
convenient may new plants and machineries in the fertilizer sector are making the job
easier and more reliable for the manufacturers of the fertilizer industry.
So, it can be said that the technology has made the positive and helping impact
on the fertilizer industry as it has made in the other sectors.
GOVERNMENT POLICY
The fertilizer sector is heavily supported by the government because of its
significant position in the agricultural sector. Producers are assured of a supply of gas
at existing prices for the purpose of feedstock and there are concessional rates for
feedstock at about one-sixth of international prices. Further both urea and DAP prices
are deregulated and there is no excise duty or sales tax on fertilize sales. The import of
plant and machinery is allowed duty-free as is phosphate rock.
1) Electricity
Electricity sector in Pakistan:

Electricity in Pakistan is generated, transmitted, distributed and retail supplied by two vertically
integrated public sector utilities; Water and Power Development Authority (WAPDA) - For
the whole Pakistan (Except Karachi) and the Karachi Electric Supply Corporation (KESC) -
For the City of Karachi and its surrounding Areas. There are around 16 independent power
producers that contribute significantly in electricity generation in Pakistan.
The electric power sector in Pakistan is still primarily state-owned. Over half of the electricity
goes to household consumers, about one third to industrial consumers, and the rest to
commercial and government consumers. Rates are determined by the National Electric Power
Regulatory Authority (NEPRA).
Other sources of generating electricity are Independent Power Producers (IPP's), some of which
have been funded by foreign investors, and a few WAPDA hydroelectric dam projects. The two
largest private power plants in Pakistan are the Hub Power Company (HUBCO) and the Kot
Addu power company (KAPCO). HUBCO, with a 1,300-MW capacity, is owned by a
consortium of International Power (UK), Xena (Saudi Arabia), and Mitsui Corporation. The Kot
Addu plant, with a 1,600-MW capacity, was privatized in 1996 (from WAPDA). International
Power holds a 36 percent equity stake in the Kot Addu plant, while the government holds a
soon-to-be divested 64 percent stake. Both of these plants, as well as a few other small private
operators, sell power to the national grid currently run by WAPDA.
Government Energy Policy:

The govt. policy for the energy sector has been reformed from time to time but we will take a
closer look at the policies.
Energy Policy
Energy sector is regulated and to a large extent owned and operated by the Government of
Pakistan (GOP). GOP has been carrying out institutional reforms in the energy sector for the
last 15 years. Besides improving the efficiency of public sector institutions, policies are aimed
at increasing private sector participation in the development of energy sector
Introduction of Independent Power Producers (IPPs)

When the ‘Policy Framework and Package of Incentives for Private Sector Power Generation
Projects in Pakistan‘ was announced by GOP in March 1994, the total installed capacity in the
country was 10,800 MW. This capacity was insufficient to meet the demand on year round
basis, particularly during low river flows period, and it necessitated load shedding of the
magnitude of 2,000 MW during peak load hours. At that time, an optimistic load projection at
the rate of 8% per annum for the next 25 years gave rise to an estimated 54,000 MW additional
electricity generation capacity requirement up to year 2018. Such an ambitious programmes
could not be financed by the GOP, and therefore, resource mobilization in the private sector was
considered essential to meet these development targets.
Supply & Demand of electricity in Pakistan:

Pakistan's current installed capacity is around 19,845 MW, of which around 20% is
hydroelectric. Much of the rest is thermal, fueled primarily by gas and oil.
Installed Capacity:
• Electricity - total installed capacity: 19,505 MW (2007)
• Electricity - Sources (2007)
○ fossil fuel - 12,580 MW - 65% of total
○ hydro - 6,463 MW - 33% of total
○ nuclear - 462 MW - 2% of total

Electricity production:
• Electricity - production: 88.42 TWh
• Electricity - production by source
○ fossil fuel: 63.7% of total
○ hydro: 33.9% of total
○ nuclear: 2.4% of total Growing demand
Supply & demand of electricity

2008 2009 2010 2011 2012 2013 2014 2015
15,90 15,90 15,90 15,90 15,90 15,90 15,90 15,90

Existing Generation
3 3 3 3 3 3 3 3
Proposal / Committed 10,11 10,55 13,30 13,52 14,60

530 4,235 7,226
Generation 5 6 7 0 7
Total
16,48 20,13 23,12 26,01 26,45 29,21 29,42 30,51
Existing/Committed
4 8 9 8 9 0 3 0
Generation
Expected Available 13,14 16,11 18,50 20,81 21,16 23,36 23,53 24,40
Generation 6 0 3 4 7 8 8 8
Demand (Summer 16,48 17,86 19,35 20,87 22,46 24,12 25,91 28,02
Peak) 4 8 2 4 0 6 9 9
Surplus/Deficit
-3,338 -1,758 -849 -60 -1,293 -758 -2,381 -3,621
Generation
Current Crisis:
In June 2007, the power cuts in Pakistan lasted no more than 3 or 4 hours a day. Today, in
extremely hot weather, Pakistanis have to endure without electricity for 8 to 10 hours a day.
Industrial production is suffering, exports are down, jobs are being lost, and the national
economy is in a downward spiral. By all indications, the power crisis in Pakistan is getting
worse than ever.
Pakistan Electric Power Company PEPCO blames independent power producers (IPPs) for the
electricity crisis, as they have been able to give PEPCO only 3,800 MW on average out of 5,800
MW of confirmed capacity. Most of the IPPs are running fuel stocks below the required
minimum of 21 days. IPPs complain that they are not being paid on time by PEPCO.
Extended electricity load shedding in Karachi's five major industrial estates is causing losses in
billions of rupees as the production activity has fallen by about 50 per cent. KESC, Karachi's
power supply utility, is dealing with with a shortfall of around 700MW against a total demand
of 2200MW.
Response to the crisis:
Neelum-Jhelum hydroelectric project, first formally announced by former Minister Omar Ayub
on June 10, 2007, is finally starting in earnest under the PPP government of Prime Minister
Yousaf Raza Gilani. This hydro project is expected to add 963MW power generating capacity at
a cost US $2.2 billion, according to Business Wire. Prior to this project, the new Pakistani
Prime Minister signed a deal with a Chinese company, Dong Fong, for setting up 525 MW
thermal power plant with an investment of $450 million at Chichoki Mallian (Sheikhupura).
Both of these projects are expected help partially close the 3000 MW gap that exists today
between supply and demand in Pakistan.
Future plans:
Pilot Project for Installation of Indigenously Developed Micro Wind Turbines:

A total of 140 Micro Wind Turbines have been installed at various sites within Sindh and
Balochistan, for providing electricity to the rural households, as well as for water pumping.
(2x50) MW Wind Power Generation Project at Gharo, Sindh

On commercial grid connected electricity generation program, the Government of Pakistan has
decided to install 100 MW Wind Power Farm by June 2009. This program initiated by the
Alternative Energy Development Board (AEDB), involves financing through private sector,
land from Government of Sindh and power purchase by NTDC for HESCO. The Government
of Pakistan guarantees are backed through NEPRA. The Board has recently issued LOIs to 30
national and international companies for generation of 1500 MW power through wind energy.
A wind corridor at Gharo-Keti Bandar, Sindh has been identified with an actual potential of
50,000 MW. The pre-feasibility study of the site has been done by AEDB. AEDB drafted the
Power Purchase Agreement (PPA) and the Implementation Agreement. 8 companies with
financial and technical viability have been short-listed.
Conclusion:
It is clear that Pakistan is a suitable country for the installation of wind, due to high winds near
cities; the presence of rivers and lakes as well as the availability of wind turbines from nearby
India. There are also other reasons for installing renewable energy. It is quite normal for
extended power outages to happen on a daily basis in the country, but this cannot continue if the
Pakistani economy is to grow. In March 2007, President Musharraf stated that renewable energy
should be part of the push to increase energy supplies by 10 to 12 percent every year. The
government also set a target of 10 percent of energy to come from renewable by 2015. If the
new PPP-led government follows through with aggressive renewable energy push, Pakistan
could be an Asian leader in renewable energy given its natural resources of wind and solar as its
strategic endowments.
1) Cement Sector
Pakistan's cement sector presently is one of those sectors that have

managed to thrive in adverse conditions being faced by business across the
board in 2008-09. The country at present has 29 cement plants with an
installed capacity of producing around 39 million tones of cement mainly
Pak-land cement.
Competitors and Market Share

The competitors and their market shares in the Pakistan cement industry is
as follows.
S.N Market
Company
o Share(%)
1 Al-Abbas Cement Industries Limited 4.789
2 Attock Cement Pakistan Limited 1.894
3 Bestway Cement Limited 8.549
4 Cherat Cement Company Limited 2.508
5 D. G. Khan Cement Company Limited 7.984
6 Dadabhoy Cement Industries Limited 2.578
7 Dandot Cement Company Limited 2.489
8 Dewan Cement Limited (Pakland) 9.379
9 Fauji Cement Company Limited 18.194
10 Fecto Cement Limited 1.197
11 Flying Cement Company Limited 4.619
12 Gharibwal Cement Limited 6.085
13 Javedan Cement Limited 0.763
14 Kohat Cement Limited 3.379

15 Lucky Cement Limited 8.486
16 Maple Leaf Cement Factory Limited 9.769
17 Pioneer Cement Limited 5.236
18 Thatta Cement Company Limited 2.094
Growth In Cement Industry over Ten Years

The cement sector posted a growth rate of 4.71 percent during July-
March 2008-09. Pakistan is not only meeting its domestic needs but also
exporting the surplus. The demand and production of cement is in the
following Table.
July- Production % age Local % age Exports % age Total % age Capacity Surplus
June capacity Inc/Dec Dispatches Inc/Dec Inc/Dec Utilizatin Capacit
Despatches Inc/Dec y
(Mn. (Mn. (Mn. (Mn. Total %age Mn.

Tonnes) Tonnes) Tonnes) Tonnes) Tonnes
2000-01 15.534 -5.16 9.933 -0.04 0 0.00 9.933 -0.04 63.95 5.600
2001-02 15.723 1.22 9.833 -1.01 0.107 100 9.940 0.06 63.22 5.783
2002-03 16.321 3.81 10.980 11.66 0.430 303.6 11.41 14.8 69.91 4.911
2003-04 16.936 3.77 12.545 14.25 1.160 169.5 13.705 20.11 80.92 3.231
2004-05 17.909 5.75 14.788 17.88 1.565 34.95 16.353 19.33 91.32 1.555
2005-06 20.955 17.01 16.907 14.33 1.505 -3.83 18.412 12.59 87.87 2.543
2006-07 30.251 44.36 21.034 24.41 3.188 111.8 24.22 31.56 80.07 6.028
2007-08 37.157 22.83 22.569 7.3 7.71 142.0 30.286 25.03 81.51 6.871
2008-09 41.76 12.39 19.39 -14.0 11.38 47.48 30.775 1.61 7.69 10.98
Pakistan Cement Industry produces exportable surplus of cement which is

exported mainly to Afghanistan, India, Africa and the Middle East. The
average capacity utilization, production and export of cement in the past
three years have been given in the table and explained in graph as given
below
S.No Year Export(Mil Value

tons)
1 2006-07 3.2 185
2 2007-08 7.7 450
3 2008-09 8.9 534
4 2009-10(July- 6.7 356

March 10)
The results of above table are graphically explained in the following graph
Pakistan cement factories continue to make significant progress in cement

exports. Now Pakistan is ranked 5th in the world's cement exports after a
huge increase of 47 percent in exports during last fiscal year.
Overall cement plants of Pakistan operated at 80 percent capacity utilization

as compared with 81 percent utilization in the same month of last year.
Although Fauji Cement has claimed 100% utilization during last year.
Cement exports of Pakistan continue to show healthy and positive growth
trend and recorded 45 percent growth on Y-o-Y basis. However, on M-o-M
basis, cement exports represented a decline of 3 percent.
Weight of sea based cement exports during the month was recorded at 68
percent in overall cement exports as compared to 63 percent in July 2008. It
is important to note that cement exports to India during the month were
recorded at 63,000 tonnes, which is lower when compared with the initial
monthly average of 100,000 tonnes
COMPANY ANALYSIS
1) Pakistan State Oil Company Limited
Pakistan State Oil Company (PSO), is the largest Oil Marketing Company
(OMC) operating in Pakistan and engaged in the storage, distribution
and marketing of POL products and is among the country’s largest
corporate entities with highest earnings and capitalization. Supported by
well-established infrastructure built at par with international standards,
omprising around 877,000 million tons storage facilities representing
almost 81% of the total storage capacity in the country. PSO has an
edge over its competitors
in terms of economies of scale and cost effective operations.
PSO has always been considered as a blue chip company with market
capitalization of around Rs. 50 billion (USD 860 million). The company is
the winner of “Karachi Stock Exchange Top Companies Award” and
a member of World Economic Forum.
The PSO’s retail coverage of over 3,800 outlets which representing 80%
participation in total industry network. The rapidly expended
international standard New Vision outlets are more than 800. These new
outlets accommodate the end user’s needs but also add beauty to the
landscape. These outlets are equipped with convenience stores,
business
centers, Internet facility and CNG facility, etc. To ensure the quality of
the products being sold to customers, 16 mobile quality-testing units
have been deployed in all major cities to carry on-the-spot checks for
quality and quantity.
Industry Profile
There are four main OMCs in Pakistan that includes PSO,Shell, Caltex
and Total. PSO is the market leader by holding overall 67% of market
share and with 22% share Shell Pakistan hold second position.
PSO’s Market Share
Market Segmentation
Petroleum industry is categorized into two main markets according to
the nature of the products and their usage. The Whit Oil segment
includes MOGAS, Kerosene, Diesel and Jet Oil that are purified fuel. The
Black Oil segment represents the products, which are less purified and
used in mostly industrial sectors.
The White Oil Markets has registered the 2.6% growth while the Black
Oil Market faced 15% decline due to low demand in power sector
especially by HUBCO. PSO holds market leadership in White Oil Market
with 59 % and Black Oil Market with 79% participation.
SWOT Analysis of PSO

1. Market Share of 70% is one the main strength of PSO.
2. Company reputation in the industrial sectors adds the strengths for
PSO.
3. Product quality is also strength especially in industrial sector.
4. Service quality like plastic cards and non-fuel activities adds the
value.
5. Distribution & Fleet network, which covers 81% country retail network,
is the key edge on PSO its competitors.
6. Promotional activities add value in brand awareness and attraction of
new customers.
7. Innovation like Auto Car Wash helps PSO to differentiate with its main
competitors.
8. Storage capacity, which holds 80% of total storage capacity of the
country, is also key advantage over its competitors.
9. Technical skills in Fleet management are another strength for PSO.
10.Visionary, capable leadership adds value to PSO strength like their
NVRO operations.
11.Financial Stability with strong reserves, paid-up capital adds the trust
of stakeholders.
12.Product line width adds long range of products for more revenue
opportunities.
13.Castrol brand affiliation with PSO adds strength in terms of brand
awareness.
14.Relations with Government one of the key strength of PSO in order to
get legal protections.
Weaknesses
1. Lost & Dissatisfied customers are major weakness of PSO as they are
causing the perception of inefficient PSO.
2. Old retail outlets are major weakness for PSO as they are not enough
capable to compete the Shell, Caltex or Total outlets.
3. Untrained staff at outlets is causing inefficient services.
4. Quality assurance is not so effective to build the image of “Quality &

Quantity”.
Opportunities
1. Afghanistan's Market is the biggest opportunity for OMCs in Pakistan.
2. De-regularities of Oil industry in Pakistan add the opportunity to fill

the deficiency in few sectors of petrochemicals markets.
3. Export Opportunities of Black Oil Products is also adding the

opportunities by exporting Black Oil products, which is facing downfall
due to the introduction Gas Oil.
4. Industrial & Trade growth in Pakistan is also the opportunity for PSO
as they are adding revenues in Power sector that is the major
customer of PSO.
Threats
1. Risk of forward integration of Supplier is the key threat for PSO and
other OMCs in Pakistan. As the example, the PARCO who is one of
the main POL product suppliers to OMCs adopt the forward
integration strategy by introducing its own OMC with its new business
alliance TOTAL and named its OMC as TOTAL-PARCO.
2. Risk of Diversification in technology is also a key threat for PSO as

due to new technology used in industrial sector are causing decline in
particular POL products.
3. Availability of
4. Substitutes in Black Oil Market are causing a solid reason for the
declining trend in Black Oil Products, which is major threat for PSO.
1) NISHAT MILLS LIMITED
1-INDUSTRY OVERVIEW:
Nishat has grown from a cotton export house into the premier business
group of Pakistan with 5 listed companies, concentrating on 4 core
businesses; Textiles, Cement, Banking and Power Generation. Today, Nishat
is considered to be at par with multinationals operating locally in terms of its
quality products and management skills.
NISHAT MILLS LIMITED (NML) commenced business in 1951 as a partnership

concern, which was converted into private limited company in 1959. In
1961, the company went public and was listed on the Karachi stock
exchange, the only stock exchange in the country at that time.
NML started out as a weaving unit with 500 semi-automatic looms; later
10000 spindles were added, laying the foundation on nation’s biggest
textiles composite project. Composite project at Nishat mills limited
Faisalabad covering 98 acre of land is providing all production process

under one roof i.e. spinning, weaving, processing, stitching and power
generation.
1.1-HISTORY AND PRESENT STATUS OF NISHAT
The history of Nishat dates back to 1951, when Mian Mohammad Yahya
founded Nishat Mills. After almost half a century of undaunted success,
Nishat Group is among the leading business houses of the country and
ranks among the top 5 groups in terms of assets and sales revenue. The
group has its roots firmly planted into four-core business namely.
• Textiles
• Power generation
• Banking
• Cement
The textile business is further subdivided into 2 textile divisions;
➢ Nishat Faisalabad
➢ Nishat Chunian
The textile capacity of the group is the largest in the country. An addition of
20,000 new spindles, 100 new air jet looms and new dyeing plants has
increased the existing capacity of 242,000 spindles, 740 looms and dyeing
and finishing capacity of 5 million meters. The largest exporters of textile
products from Pakistan, for more then decade!
1.2-Major competitors
Nishat competitors are
• Crescent
• Chena
• Arzo
• Alkarms
• Sitara
• Kohinoor
• Amtex
But main competitors of Nishat Mill are
• “Crescent Textile Mills”

• “Chenab Textile”
1.3-ACCOUNTING POLICIES
BASIS OF PREPARATION OF FINANCIAL STATEMENTS
These financial statements are unaudited but subject to limited scope

review by the
auditors and are being submitted to shareholders as required under section

245 of the Companies Ordinance, 1984. These have been prepared in
accordance with the
International Accounting Standard 34 “Interim Financial Reporting” as

applicable in
Pakistan and notified by Securities and Exchange Commission of Pakistan

(SECP).
ACCOUNTING POLICIES AND COMPUTATION METHODS
The accounting policies and methods of computations adopted for the

preparation of
these interim financial statements are the same as applied in the

preparation of the
preceding annual published financial statements of the company.
1.4-Earning forecast
Coverage on Nishat Mills Ltd (NML) with a SELL recommendation based on

SOTP based fair value of PkR 55.14 presenting a downside potential of
18.32% from the current market price. Core business sums up to PkR
21.13/share (38%) and portfolio
PkR 34.01/share form 62% of fair value after applying 50% discount to it.
NML is a key player in composite textile manufacturing with around 2%
share in total textile exports of the country. With almost 85% of the
revenues generated from exports, the sales growth is dependant on (1)

Global economic recovery (2) Trade concessions from US and EU (3)
Competitiveness against local, regional and global peers. NML is positively
exposed to Rupee depreciation and 20% currency depreciation helped the
company to improve its gross margins from 15.4% in FY08 to 18.2% in FY09.
NML holds a strong portfolio in group companies with 31.4%, 6.8%, 5.8%,
13.6% and 63.2% stake in DGKC, MCB, AICL, NCL and NPL respectively. The
stock trades at prospective FY10 earnings and BV multiples of 11.43 and
0.70 as compared to
FY05-FY09 his orical average of 14.72 and 0.80 respectively.
Y/E June 30 FY08A FY09E FY10F FY11F
1.5-ANALYSIS OF FINANCIAL STATEMENTS
profitability
The profitability of NML has declined considerably, in line with the textile
industry. Despite a rise in the gross margin from 15.41% in FY08 to 18.23%
in FY09 on the back of improved top line, the profit margin reduced to
5.31% in FY09 as against 31.86% in FY08. The factors contributing to this
fall in bottom line are the 32% increase in operating costs and 59.4%
increase in the financial charges. The 6-month KIBOR rate surged up by
380bps which in turn increased the finance costs by 50% for the textile
sector. Return to equity and return to asset demonstrate a similar negative
trend, declining my 75% and 73% respectively.
LIQUIDITY
The liquidity analysis shows that the liquidity has declined in FY09. This has
been the second consecutive year of deteriorating liquidity position. The
current ratio has declined from 1.19 in FY08 to 0.86 in FY09 while the quick
ratio has declined from 0.80 in FY08 to 0.38 in FY09. The decrease in
current liabilities in FY09 is 18.08% while the decrease in current assets is
by 40.46%. There is a decline in quick assets by 52.5% against a substantial
decline in quick assets of the company. In order to comply with the
requirements of IAS 39 and in view of market conditions and current
economic scenario in the country, the company decided to record full
impairment of Rs 17.259 million against those available for sale securities
where fair market values were less than their cost as at 30 June 2009.
Despite improved revenue the firm has low working capital available for
short-term funding needs.
1.6MARKET WORTH
The price to earnings ratio shows a positive surge despite the prevalent
uncertain market conditions. EPS declined by 82.27% due to the eroded
profitability. The prices displayed an overall declining trend amongst several
fluctuations from a high of Rs 85.97 in FY08 to a low of Rs 22 but recovering
to Rs 34.29 at the end of FY09. The dividend per share has declined from Rs
2.5/share to Rs 2/share. The book value has shown a decline due to increase
in the number of shares outstanding. The company issued 79,892,858
ordinary shares of Rs 10 each, paid at Rs 25 per share (inclusive of premium
of Rs 15 per share). Thus, the paid up capital of the Company has increased
from Rs 1,597,857,170 to Rs 2,396,785,750 by the issue of said right
shares. The funds were utilized by the company to meet the working capital
requirements and to counter the liquidity crunch of banks.
1.7-FUTURE OUT LOOK
According to the Alfalah Securities research, the nishat mills ltd will get the
following results.
1.10-SWOT ANALYSIS:
Strengths:
• ISO 9001-2000:
• Strong Security System
• High quality product
• Latest mechanized machinery.
• Tremendous market positioning
• Highly qualified and skilled management
• Highly Motivated Workforce
• Adequate financial resources
• Competitive advantage
• Equipped with MIS System
• Own power generation plant
Weaknesses
• High cost of production
• Centralized decision making
• Weak image in the international market
• Small international market share
• Less promotional activities
• Lack of benefits and rewards for the employees.
OPPORTUNITIES:
• Organization Can expand product lines
• Organization Can capture new market segments around the world
• Organization Can reduce the cost by proper utilization of resources
• Organization Can hire more well-educated and experienced person
Threats:
• New Entry of competitors

• Buyer needs demands changes
• Political instability
• Changed of government policies
• Globally Economic instability
1) ENGRO CHEMICALS COMPANY ANALYSIS
As we know that the Ferlizer sector has the great importance in the
Economy of Pakistan and one of the main companies in the fertilizer sector
of Pakistan is the Engro Chemicals Pakistan Limited.
Company Valuation(Rs/Shr) Contribution Valuation Model
Engro 130 55.3% FCF

Fertilizer &
Exim
Engro Foods 65 27.7% Price to sale
Engro 15 6.4% DCF

Polymer
Engro Energy 13 5.5% DDM
Engro Vopak 11 4.7% DDM
Engro 1 0.4% Valued at Cost

Avanceon
Engro 235
Corporation
This table shows the valuation and contribution of Engro Corporation’s

which shows the contribution of different branches of Engro and also the
valuation of share in rupees. The Fertilizer and Exim has the highest
valuation of Rs 130 per share and the contribution of 55.3%. This shows the
importance of Fertilizer in the whole Engro company.
Engro Chemicals Pakistan Limited is an agri-based company, engaged

in the business of manufacturing and marketing of fertilizers. The company
was incorporated in 1965 and was formerly known as Exxon Chemical
Pakistan Limited until 1991. Engro Chemical Engro is country’s second-
largest urea manufacturer with a market share of 19% during CY08. It also
imports and sells DAP, in which it had a 14% market share as of CY08. The
company is growing from its fertilizer roots to become a diversified
conglomerate. Apart from its urea manufacturing business, Engro has
subsidiaries and
joint ventures engaged in PVC manufacturing, dairy products, bulk chemical
handling and power generation, while recently company has announced de-
merge of the business as discussed earlier. Going forward company is in the
process of massive expansion plan at a cost of approximately USD1.05bn to
expand its urea capacity to
2.3mn tones which is 133% percent of its current capacity.
ANALYSIS OF FINANCAIL STATEMENTS
The analysis of the financial statements of Engro includes the financial

position of the company and the ration analysis
DEBT MANAGEMENT
2004 2005 2006 2007 2008 2009
Total debt to asset 0.50 0.48 0.47 0.59 0.62 0.71
Total debt to equity 1 0.91 0.90 1.44 1.61 2.49
Time Interest 6.64 9.28 8.03 6.90 3.81 4

Earned
Long term debt to 0.55 0.53 0.43 1.11 1.35 2.25

equity
PROFITABILITY
2004 2005 2006 2007 2008 2009
Net Profit Margin 13% 13% 14% 14% 18% 13%
Grass Profit 26% 21% 27% 21% 27% 23%

Margin
Return on Assets 16% 11% 8% 7% 4%

12%
Return on Equity 24% 31% 22% 20% 18% 15%
LIQUIDITY
2004 2005 2006 2007 2008 2009
Current Ratio 1.5 1.8 1.6 3 2.6 1.7
Dividend Per 8.50 11 9 7 6 6

Share
Earnings per share 8.30 11.30 12.40 13.54 16.8 1.4
INTERPETATION OF FINANCIAL POSITION
During FY09, the company produced 952,000 tons of urea which is 4% lower
than 995,000 tons of 2008 production; this was mainly due to the planned
maintenance shutdown in the second quarter. The company sold 933,000
tons of urea and consumed 20,000 tons in the Zarkhez operations. Also
there has been a decline in Engro s share because of production remaining
constant having reached the maximum capacity and while there was a
growth in urea demand, the distribution of imported urea was handled
directly by NFML.
During the year under review, the company sold 357,000 tons of
phosphates as compared to 128,000 tons in 2008, achieving a market share
of 21% against 16% in 2008. The growth was based on the focus on
anticipating demand and market trends. As a result of the higher
international potash prices in 2009, the potash nutrient industry registered
a 33% decline during the year. Being the largest player in the potash
market, Zarkhez sales dropped to 55,000 tons, a decline from 69,000 tons
levels of 2008. However, the market share of potash increased from 51% in
2008 to 65% in 2009.
Net sales of the company have shown an increasing trend over the
last 5 years. The sales stood at Rs 18,276 million in FY05, whereas in FY09
these have increased to Rs 30,172 million. The gross profits have also
shown an upward trend, increasing from the levels of Rs 3,912 million in
FY05 to Rs 6,931 million in FY09.
The profits after tax have been showing a fluctuating trend over the
last 5 years. They stood at Rs 4,240 million in FY08, and declined to Rs
3,957 million in FY09. This fluctuating profitability trend has lead to
fluctuations in the profitability ratios of the company. The net profit margins
in FY09 stood at 13% in FY09 as compared to 18% in FY08 and 14% in FY07.
Also, the gross profit margins stood at 23% in FY09 as compared to 27% in
FY08 and 21% in FY07.
The return on assets and return on equity have been declining over the
last 5 years. The RoA declined from 15% in FY05 to 4% in FY09. The RoA
stood at 7% in FY08. There has been a massive increase in the total assets
of the company. The total assets increased from Rs 57,164 million in FY08
to Rs 93,709 million in FY09.
The property, plant and equipment have increased from Rs 33,553

million in FY08 to Rs 69517 million in FY09. The property, plant and
equipment have increased mainly on account of the urea expansion project.
The property, plant and equipment included in capital work in progress due
to urea expansion project increased to Rs 47,081,203 thousands in FY09 as
compared to Rs 23,064,182 thousands in FY08. The RoE has declined from
18% in FY08 to 15% in FY09. This has been due to the increase in the
equity. The equity increased from Rs 21,054 million in FY08 as compared to
Rs 26,888 million in FY09.
The total liabilities of the company have been increasing over the last 5
years. They have increased from Rs 36,111 million in FY08 to Rs 66,821
million in FY09. Tremendous increase has been seen in the long term
liabilities. They have increased from Rs 30,112 million in FY08 to Rs 60,426
million in FY09. The borrowings of the company have increased from Rs
27,757 million in FY08 to Rs 58,565 million in FY09. The increase in the
borrowings has been for the urea expansion project. Included in these are
the loans from consortium of development finance institutions comprising of
DEG, FMO and OFID for an amount of US $85,000. Also the company has
contracted a loan with International Finance Corporation for US $50,000.
Another major increase on the liabilities front has been in the employee
housing subsidy. In 2008, the company announced a medium term
Employee Housing Subsidy Scheme for its employees who were not entitled
to Employee Share Options. The company has completed disbursements of
Rs 395,606 thousands in FY09 as compared to Rs 152,223 thousands in
FY08. With the increase in the liabilities the total debt to equity ratio of the
company has reached a level of 2.49 as compared to 1.61 in FY08. Even the
debt to total assets has increased to 0.71 as compared to 0.62 in FY08.
The current ratio of the company has been declining over the years. During
FY09 it declined to 1.7 as compared to 2.6 in FY08 and 3 in FY07. During
FY09 the current liabilities of the company increased from FY08 levels of Rs
5,999 million to Rs 6,395 million. Increase was seen in derivative financial
instruments, which have increased from Rs 155 million to Rs 740 million.
The company has entered into forward exchange contracts to hedge its
foreign exchange exposure.
The company has forward contracts to purchase euro 9,543 in FY09 as

compared to Euro 130,505 in FY08. Also, the company has entered into
foreign exchange option contracts to hedge its currency exchange against
US dollars relating to the expansion project. The country had foreign
exchange options amounting to Euro 12,628 in FY09. The company has
entered into an interest rate swap agreement to hedge its interest rate
exposure on floating rate committed borrowing from a consortium of
Development Finance Institutions for notional amount of US $85,000. During
FY09 the current assets of the company declined to Rs 10,749 million in
FY09 from Rs 12,042 million in FY08.
With the increasing net profits after tax for the last 6 years, the earnings per
share have also increased. The net income stood at Rs 1,611 million in FY04
as compared to Rs 3,957 million in FY09. Also, the EPS has increased to Rs
14 in FY09 as compared to Rs 8.3 in FY04. The dividend per share has been
fluctuating over the last 5 years. In FY05 the dividend was Rs 11 which has
declined to Rs 6 in FY09 showing a payout ratio of 43%, as compared to a
payout of 100% in FY05.
2) Hub Power Company Limited
History
In 1985, the Government of Pakistan, with the help of the World Bank,
developed a long-term energy strategy which envisaged the involvement of
private investors in power generation. The objective was to meet the
increasing demand for power in the country, in the most efficient and
effective way to achieve the levels of growth the Government had set for
the economy.
A year later, the development of the Hub Power Project began.
Company Profile
Overview:
The principal activities of Hub Power Company Limited (HUBCO) are to own,
operate and maintain an oil-fired power station with a net capacity of 1,200
MW that today provides about 6 percent of the country’s total electricity
generation, and also to carry out the business of power generation,
distribution and sale at other places in Pakistan. This company is located in
Tehsil Hub, District Las bella, Balochistan.
The Hub Power Company Limited or HUBCO was incorporated in Pakistan in

1991. It is publicly owned company listed on the Karachi, Lahore and
Islamabad stock exchanges.
The HUBCO power station is the first and largest power station to be
financed by the private sector in Southern Asia and one of the largest
private power project in the newly industrialized world. The power plant is
operated and maintained under contract by International Power Global
Development (IPGD), One of the leading power producer in the world.
The hub power station was the first project to be successfully co-financed by
several government, the World Bank as well as international private sector
lenders and investors. It set the standards for the formulation of a private
power framework in Pakistan which has since resulted in up to 40 present of
Pakistan’s energy needs being met by private power producers.
Growth Through Energy
Living with the motto of Growth through Energy, HUBCO is embarking on

two new energy sector Projects – a 220 MV thermal power project that will
be established at a site in Norowal in the Punjab Province, and a 84 MV

hydropower project to be located 8 kilometres downstream from the Mangla
Dam. HUBCO was the first Independent Power Producer to set up a thermal
power plant in Pakistan and now it will be the first IPP to establish a
hydropower project.
Tripple Bottom Line Concept
HUBCO is dynamic company whose business operations are firmly based on

sustainable growth and development. To this end the company actively
pursues the Tripple Bottom Line of People, Plant and Profits.
People
‘People’ in the context of HUBCO’s operations include its employees, the

community, its business partners and its shareholders.
HUBCO believes that its employees are the Company’s most important
resource. The recruitment of the employees follows stringent procedures to
ensure that the very best talent is taken on in all specialities, be it
engineering, finance and accounting, HR, administration, information
technology, company law, logistics, business development and so forth.
Planet
As a caring corporate citizen, HUBCO takes a long-term view on its own

responsibility to the planet. Before the planet was commissioned in June
1996 a comprehensive environmental and social soundness assessment
was completed which set the standard for the project’s environmental
operations in meeting both the national and World Bank’s environmental
targets and standards.
In the future context, HUBCO will be the first independent power producer
(IPP) in Pakistan to establish an environmentally friendly hydropower
project. To achieve this, HUBCO acquired 75 percent controlling interest in
Laraib Energy Limited at the beginning of August 2008 with the objective of
doing everything necessary to ensure the timely complection of an 84 MV,
run of the river hydropower generating complex being set up about 6
kilometers downstream of Mangla Dam.
Profits
HUBCO has consistently achieved targeted profits since its inception and
remains committed to maintaining the HUBCO share as a secure and
sustainable investment.
So, for the evaluation of the company’s success, the profits that it achieves
remain a key performance indicator. Extending this into the realm of the,
Tripple Bottom Line concept, two other factors should also be noted.
• First , the profits must be consistent,

• Second, the profits must be sustainable,
The Hub Power Company Limited has by now amply demonstrated

that it meets these parameters. Not only it has consistently paid dividend to
its shareholders in line with its projections and markets expectations, it has
already committed on a future growth strategy.
The Norowal Project comprises of 11 ‘V’ type low-speed MAN diesel

engines each having a capacity of 18.43 MV, and 11 heat recovery steam
generators. Under site conditions, the gross capacity of this new power
plant will be 219.16 MV, while the net capacity will be 213.60 MV. The Net
Thermal Efficiency would be 45 percent at 100 percent Load Factor. The
electricity generated will be sold to the National Transmission and
Distribution Company (NTDC) under a 25 year Power Purchase Agreement
(PPA).
Future Growth in Energy
Now in its leadership role as the largest independent power

producer (IPP) in Pakistan, HUBCO is looking ahead positively to the future
under its new motto Growth through Energy, adopted in year 2006. In
practical terms the company’s motto is being enacted through new projects
that are already in the pipeline. The First, the Norowal thermal power
project is expected to be on stream in March, 2010, less than 20 months
from now. The second, The Laraib hydropower project, is expected to be
fully operational in about 39 months. This project will also be the country’s
first hydropower project by an IPP.
As the country’s demand for energy continues to grow

rapidly, HUBCO stands committed to enhance its own generation capacity
through new power projects.
Competitors:
• Altern Energy ,
• Genertech,
• Japan Power,
• K.E.S.E,
• Kot Addu Power,
• Nishat Chun Power,
• Nishat Power Ltd,
• Sitara Energy,
• Southern Electric
• Tri-Star Power
Share Market:
Hub Power Company contribute its share to the market in the electricity
generation and production point of view, it is the second company who is
generating electricity according to its competitors in the market. Its share to
the market contribution is shown below,
Financial Analysis
In financial analysis we will discuss about HUBCO turnover, gross profit,

total operating expense net profit before taxes and after taxes during the
last 10 years,
Turnover:
Interpretation:
•Turnover for the year 2001, was Rs.29, 086 million and in 2000, was
25,601million.
• In 2002, turnover decrease and it was Rs. 21,367 million, and in
2003 further decrease turnover was Rs. 19,514 million.
• In 2004 turnover was Rs.16,003 million and in 2005 increase and
reach 16,978 million, and 2006 was Rs. 27911 million.
• In 2007 it was Rs. 44,131 million and in 2008 it was continuously
increase and reaches to 62,435 million.
• In 2009 turnover tremendous increase and reaches Rs. 82784 million.
Comments:
If we analyze turnover data of last 10 year we can say that from last
year there is a increasing trend of Hub Power Company turnover,
which is a good sign for the investor to invest in the shares of this
company.
Gross Profit:
Interpretation:
• Gross Profit of Year 2002 is Rs. 9,829 million more than, 2001 is Rs.
8,492 million.
• In 2003 gross profit is Rs. 8,492 million,
• In 2004 gross profit is Rs. 7,896 million, In 2005 is Rs, 7,157 million.
• In 2005 gross profit is Rs. 4,358 million, and in 2007 is Rs. 4,163
million.
• Gross profit increase in 2008 with Rs. 4,749 million to in 2009 with Rs.
6,097 million.
Comments:
If we analyze the data of last 10 years for the investment point of view to
whether the Hub Power Company is consistently maintain and increase its
gross profit or not. We analyze after analyzing the financial statement s
that is increasing its gross profit from the last year and it is a good sign for
the investor to invest in the securities of this company.
Net Income / Loss:
Interpretation:
• Net profit in year 2001 is Rs. 10,859 million and in 2002 it was
Rs. 7,286 million.
• With decrease of it was in 2003 Rs. 6,102 million and in 2004 it
was Rs.5,483 million.
• In 2005 profit was 5,385 million and in 2006 it was Rs. 2,768
million.
• In 2008 profit was Rs. 2,602 and in 2009 with the increase it was
reached Rs. 3780 million.
Comments:
After analyzing the data of net profit of the company we analyze

that the Hub Power Company is going into profit, and now
company will grow and it will sustain the profit. Because last
year it earn profit 11 million more than from the previous year
which is a good sign to invest in these securities. If company
earns more profits then there will be more return on the
investment.
COMPANY ANALYSIS
Lucky Cement Company Limited is currently the largest manufacturer

of cement in Pakistan. During FY09, Lucky Cement started operation of
1.25mtpa production capacity of Line 'G' at Karachi plant, increasing its total
production capacity to 7.75mtpa.
The company increased the capacity of its Karachi plant keeping in

view the lucrative potential of export to Gulf region and African countries.
During FY09, the company's production of clinker and cement increased by
8.7% and 8.9% respectively. Lucky Cement produced 5.61 million tons of
clinker and 5.72 million tons of cement during FY09. As a result of massive
capacity expansion over the past years, Lucky Cement has been able to
consolidate its position as the largest cement exporter. The company has
the highest export market share of 30% and a major portion of local sales
with the market share of 13%.
FINANCIAL POSITION
The profits of Lucky Cement has been increasing since FY03, however,
at varying rates. The growth in profits had been declining from FY06 to FY08
due to rising costs but surged during FY09. During FY08, the growth of the
company's profits slowed down to 5%.
FY08 was marked by the cement sector as not only the year which
saw growth in cement prices, both locally and internationally, helping the
companies to secure more profits; but also the year in which they faced
massive growth in operation costs, primarily fuel and electricity costs. This
led the cement companies of the country to face massive problems in
continuing productions and even to obtain profits from sales after the
deduction of operation costs. Many cement companies were faced losses
due to these costs.
Lucky Cement managed to obtain profits during FY08 when other

companies posted losses. Lucky Cement anticipated these events and
quickly employed counter strategies, like shifting to exports and reducing
finance costs, resulting in high profits for the company. Also the energy and
fuel crisis has also been spotted by the company in due time and preventive
measures are employed with the hope that they will reduce operations and
fuel costs in the future.
Lucky Cement had showed a growth of 35.4% in sales, from Rs

12.25bn in FY07 to Rs 16.95bn in FY08. This growth was achieved through
increase in exports, along with the rise in cement retention prices over the
year. Local retention prices showed an increase of Rs 133.7 per bag in FY08
from Rs 129.7 per bag last year, having a growth of 3.1%. Export retention
prices on the other hand, showed an increase of US $55.7 per ton (Rs 152.6
per bag) in FY08 as against US $47.2 per ton (Rs 133.2 per bag) in FY07.
Although sales volume of the company grew by 19.7% to 5.56m

tons as compared to 4.64m tons last year, yet domestic sales for the same
period declined by 9.2% to 2.89m tons as against 3.18m tons last year. This
occurred due to more focus toward high yield exports, which showed a
growth of 83.0% to 2.67m tons in FY08 from 1.46m tons last year. During
FY08, ratio of local sales to export was 52:48 against 69:31 in FY07.
The gross profit margin of the company revived to 37.26% during

FY09 from 25.73% in FY08. Likewise, the profitability margin of the company
also improved from 15.79% in FY'08 to 17.46% in FY09. This shows that the
profitability of the company has improved during FY09 after declining in
FY08.
The gross margin showed a declining trend in FY08, primarily due to

the rising costs of production, especially in terms of rising fuel prices like
coal, which rose from US $80 per ton to US $210 per ton from FY07 to FY08.
Also the price of furnace oil was increased. Net margin showed a similar
decline although finance charges were reduced since last year from Rs
836m to Rs 127m, representing a decline of 85.3%, as the company entered
into cross country swap agreements with the banks. But the effect was
nullified, as the fair value loss on these agreements was included in the
other charges under exchange differences.
Return on assets (ROA) and Return on Equity (ROE) also increased

during FY09 due to a higher proportionate increase in profits as compared to

the increase in asset and equity base of the company. The assets and equity
of the company increased by 12% and 24% while the profit after taxation
surged by 72%.
DEMAND ANALYSIS
The local demand became the driver for volume growth for nine
months ending March 31 2010. The cement industry witnessed an overall
volumetric growth of 12.4% both in local and export sales with overall
volume of 25.3 million tons in nine months ending March 31, 2010 as
compared to 22.5 million tons sold during the same period last year. The
overall sales volume increased by 2.8 million tons, mainly on the back of
cement demand in local markets.
The industry witnessed local sales volumetric growth of 17% during

the nine months of current financial year with sales volume of 17.5 million
tons as compared to 14.9 million tons sold during the same period last year.
The export sales volume of the industry increased by 3.5% with volume of
7.9 million tons as compared to 7.6 million tons sold during the same period
last year.
Lucky Cement achieved a sales volume of 4.86 million tons as

compared to 4.15 million tons sold during the same period last year. The
local sales registered a hefty growth of 24% whereas export sales volume
witnessed 12% growth. During the quarter under review, the local sales
volume increased by 46% which enhanced the local market share to 13.8%
from 13% previously. The export market remains shaky in the aftermath of
financial crisis and new capacities coming online in the potential export
zones. The export growth in the 3Q10 was negative. However, the recent
grant of inland freight subsidy to the tune of 35% would no doubt bolster
the exports of the sector.
In line with the industry trend the net sales revenue of Lucky cement
during the nine months decreased by 5.7% as compared to same period last
year because of decline in the cement prices both in local and export
markets. The local prices were decreased by 27.53% whereas the export
prices were decreased by 12.90%. The ratio of sales revenue from exports
was 61% whereas the local sales accounted for 39% during the nine months
of current year.
Due to rising input costs and declining prices, gross margins were hit
across the industry. Lucky cement achieved a gross profit rate 35% for the
nine months ended March 31, 2010 as compared to 37.2% gross profit rate
achieved during the same period last year. However, going forward, the
waste heat recovery project of Karachi has started operations that would
certainly benefit the company in terms of cheaper electricity generation in
the future. The margins therefore going forward are expected to pick up in
comparison to the industry.
The finance cost decreased to Rs 418.309 million from Rs 998.032

million during the same period last year through repayment of expensive
debt and resorting to cheaper export refinance facility. The distribution and
selling charges have surged due to volumetric increase in export sales.
Lucky earned a net profit after tax of Rs 2.56 billion, as compared to Rs 3.07
billion during the same period last year. The earnings per share for this
quarter was Rs 2.02, whereas on cumulative nine months basis the earnings
per share was Rs 7.92 as compared to EPS of Rs 9.5 in the same period last
year.
A comparison of Key Financial Results of the Company is as under.
Particulars 2009 2008 Percentage
Sale Revenue 26330404 16957879 55.27 %
Gross profit 9811266 4357173 125.18 %
Operating Profit 7217493 3076367 134.61 %
Profit Before Tax 5177001 2306529 124.45 %
Net Profit After 4596549 2677670 71.66 %

Tax
Earnings Per 14.24 9.84 44.41 %

Share
 PSO (Pakistan State Oil) ------------ Suhail Munir Kiani

 Engro Corporation------------------- Zeeshan Ali Ahmed
 Lucky Cement------------------------ Ghulam Ali
 NIshat Mills--------------------------- Asim Kiani
 HUBCO-------------------------------- M Jamshaid
This is the Bar Chart of the technical analyses of PSO (Pakistan State
Oil)
This is the Bar chart of Technical Analysis of Engro corporation.
This is the Bar chart of Lucky Cement

INTERPETITATION OF TECHNICAL ANALYSIS
The technical analysis we have made on the five companies of different

sectors of Pakistan which show the share price of each company for the last
five years that are 2005 to 2009.
TOOL
We use the BAR CHART to represent the prices over the past years and a
trend line to more clarify the trend of share prices.
TIME PERIOD
We take the share prices of these five companies on the monthly bases nd
closing price of each month is been selected.
TREND OF COMPANIES SHARE PRICE
The share prices trend of all five companies are as under
PSO has the cyclical trend of prices with the highest price of Rs 546
and the lowest price of Rs 139.
Nishat Mills Limited also has the cyclical trend of prices with the
highest price of Rs 139 and the lowest price of Rs 22.06.
Engro has the cyclical trend of prices as well with the highest price of
Rs 329.05 and the lowest price of the share Rs 96.46.
HUBCO also has the cyclical trend of prices with the highest price of
Rs
Lucky Cement has the cyclical trend of prices as well with the highest
price of Rs 187 and the lowest price of Rs 36.

Investment & Portfollio Management: Proje CT Repor TON

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Investment & Portfollio Management: Proje CT Repor TON

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INVESTMENT & PORTFOLLIO MANAGEMENT

INVESTMENT & PORTFOLLIO

ARMY PUBLIC COLLEGE OF MANAGEMENT &

“Investment in different securities in KSE 100

Project Submitted to:

Sir Syed Waqar Akbar

1400015 M. Asim Iqbal Kiani

SWEET CLASS FELLOWS

ARMY PUBLIC COLLEGE OF MANAGEMENT & SCIENCES,

Subject: Submission of Project on “Investment in

We are thankful to you for assigning us the requirement of

Thanks and regards

We are all thankful to our teacher of Investment & Portfolio

At the end, we are thankful to everyone who has been helping us

• Economic Analysis of the country to take decision that whether it will be

• On the basis of the sector performance, level of associated Risk &

• Selection of 1 company from each sector on the basis of company’s past

f) Per capital income

a. Gross Domestic Product

Gross Domestic Product

Gross National Product

c. Consumer Price Index/Inflation:

The rat e of inflation is an important macro economic

Inflation has inverse relationship to the industrial growth. Our economy is

Interest rates are the main determinants of investments on a

e. Per Capita income

From 2004 to 2009 per capita income is going upward.

earning enough foreign exchange. An analysis of such depreciation in

Exchange Rate (RS.)

Unemployment is one of the major problems of Pakistan. It is the root

10.2 7.9 7.8 8.3 7.7 9 6.2 6.7 8.1 9 10.2

Debt (in Billion of Rs.)

200 200 200 200

i. Balance of Payment and Trade:

The balance of payments (BOP) means a systematic record of all the

BOP and BOT (in Billion of Rs.)

j. Foreign Direct Investment

Foreign direct investment (FDI) has emerged as a major source of private

The political environment is not stable in the country and country is

SNAP SHOTS OF ECONOMY OF PAKISTAN

Currency 1 Pakistani Rupee (PKR) Rs. = 100 Paisas

Fiscal year July 1–June 30

Trade organisations ECO, SAFTA, ASEAN, WIPO and WTO

GDP $431.2 billion (PPP) (2008)

GDP growth 2.0% (2009 est.)

agriculture: 19.6%, industry: 26.8%, services: 53.7%

Inflation (CPI) 11.17% (2009-2010)

Population below poverty

55.88 million (2009 est.)

Unemployment 15.2% (2009 est.)

textiles, chemicals, food processing, steel, transport

Exports $17.87 billion (2009 est.)

textile goods (garments, bed linen, cotton cloths, and

United States 22.4%, UAE 8.3%, UK 6%, China 15.4%,

Imports $28.31 billion f.o.b. (2009 est.)

Petroleum, Petroleum products, Machinery, Plastics,

China 14.7%, Saudi Arabia 10.1%, UAE 8.7%, Japan

Public debt $50 billion (2009)

Revenues $23.21 billion (2009 est.)

Expenses $30.05 billion (2009 est.)

1) Oil and Gas Industry

1. Attock Refinery 1. Pakistan State 1. OGDCL 1. Sui