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Exports boost Al Shaheer 80% revenue

Preference for the Al Shaheer Corporation (ASC) stems from diversification into frozen food business, insulation against the rupee depreciation, and attractive trading multiples significantly lower than industry peers.

The company has a market share of over 8 per cent in the country’s meat exports.

ASC derives 80 per cent of its revenue through exports as of FY21. It primarily exports to Saudi Arabia and the UAE markets, which are expected to grow 10 per cent YoY.

As per the recent data, meat exports increased 6 per cent YoY in December 2021 and this momentum is expected to continue, as meat exporters explore the Egyptian and Chinese markets.

Notably, Pakistan has recently received approval from the Egypt’s Veterinary Quarantine Department for the export of meat. The main focus on exports benefits ASC in the light of the recent currency depreciation.

The company has recently launched its new brand ‘Chef One’, which deals in frozen meat. As per the management, this is expected to generate sales of 160 to 200 tonnes on a monthly basis. This brand is available in all leading cities of Pakistan, including Karachi, Lahore and Islamabad.

The management aims at attaining a market share of 3.6 per cent in 2022 in the frozen meat segment.

Presently, the frozen chicken market share is dominated by K&Ns, with an estimated market share of 50 per cent. Consequently, ASC would likely to require an aggressive marketing campaign to achieve its targeted share.

ASC intends to increase the contribution of high margin products to 40 per cent through this launch. Moreover, the management is eyeing sustainable gross margin of 30 per cent after the launch of Chef One.

Other domestic projects of ASC included ‘Meat One’ and ‘Khaas Meat’. Both these ventures offer quality standards of meat selection processes. Despite offering high quality and hygienic products, the general population prefers meat from the unorganised markets because of considerably lower prices (40 per cent cheaper than Meat One).

Consequently, ASC is focused towards expanding its export market because of its quality standards.

ASC’s Qurbani project posted a growth of 95 per cent YoY, attributable to concrete shift in the consumer behaviour because of the pandemic.

Most notably, ASC’s Qurbani services have been fully booked for the last two years since the initial spread of the virus.

Honda Atlas Cars may keep growth momentum

Honda Atlas Cars is expected to post an EPS of Rs9.72 for the nine months ended December 2021. The earnings are to be driven by higher net sales, owing to higher sales volume for the recently launched City model coupled with an increase in the gross margins due to the launch of the City model at higher prices and price increase for Civic and BR-V in November 2021.

It is a subsidiary of Honda Motor Co Ltd, Japan. The company’s principal activities are assembling and progressive manufacturing and sale of Honda vehicles and spare parts. It commenced commercial production from July 1994.

The trajectory of the automobile industry lately depicted a mixed picture. While the demand for automobile products remained strong, the global microchip shortage halted or delayed the production of vehicles across the automotive industry.

Apart from the microchip shortage, the supply of basic raw materials like steel, aluminum, rubber and thermoplastic resin become unreliable with incredibly volatile prices.

Despite these factors, car manufacturers remained focused on introducing exciting vehicles to fuel the growth. At the beginning of the second quarter, the industry had high expectations for better margins and improved volumes. The unfavourable exchange rate parity; however, caused adverse impact and eroded the potential upside.

Consequently, the automobile industry had to endure intense pressure of a drastic rupee depreciation and its inability to pass on the impact timely.

The State Bank of Pakistan’s intervention to amend the auto financing arrangements further dampened the demand. With the ongoing inflation level, interest rates are likely to rise again. Eventually, the industry may experience sluggish demand from the banks and leasing companies.

Grappling with stiff challenges, the automobile industry still managed to attain satisfactory production and sales levels for the half year.

The economic recovery now appears less vulnerable to the pandemic-related uncertainties. However, strong demand, rising global commodity prices coupled with external factors stemming from neighbouring Afghanistan is likely to add pressure on the widening trade deficit and consequently rupee parity.

Accordingly, there is a need to ensure appropriate policy mix to protect the longevity of growth, keep inflation anchored and controlled growth in the current account deficit.

In the short-term, sustainability measures requires that trade deficit remains manageable. In this regard, macroeconomic stabilisation measures along with the structural transformations will help the economy move onto a higher and sustainable growth trajectory.

While for the long-term growth enhancement, it is important that it is driven by expansion of domestic production.

As the economy is returning to full capacity, the automobile industry is expected to continue its growth momentum.