Chemical sector of Pakistan is estimated to be over USD 3 billion with foreign direct investment of USD 66.9 million being invested in the sector for the fiscal year ended 2012. According to the Chemical Industry Vision – 2030 available on Engineering Pakistan website, the chemical industry in Pakistan is classified as Primary and Secondary.
The Primary chemical industries comprise refineries, petrochemicals, natural gas, metallurgical and mineral based projects. They also provide feedstock for the secondary chemical industry.
The Secondary chemical industries are based on feedstock either derived from Primary industries or other alternative sources of raw material like coal, limestone, gypsum, rock salt, silica, and sulphur.
Chemical industry is less capital intensive and based on varying level of advanced technologies. The outstanding success of the industry, more than 70,000 products, is due to the constant scientific and technological advances and breakthroughs, which have led to the expansion of new products and procedures which is complemented by investor friendly business policies.
The sector is particularly attractive due to virtually unlimited supply for feedstock from the primary industries due to the growth in overall energy requirements of Pakistan and the uses of secondary industries in consumer driven demand of textile, health care and agriculture.
Overall, the companies in the sector depict mixed performance with 12 companies being in losses as compared to 22 listed companies. However, it should also be noted that some companies are in a growing stage with high D/E ratios impacting negatively on profitability.
Based on the above sector analysis, Fauji Fertilizer Bin Qasim Limited is clearly the gem of this sector beating all the normalized sector criteria. The company also seem to be reasonably valued with market value being inline with the enterprise value. The company also depicts higher margins with CAGR being twice that of normalized sector median and the least amount of debt, 0.41 times the operating profit.
Notes: N/A in CAGR is for companies for which 5 year data was not available.
