By: Global Securities Pakistan Limited
We initiate our coverage on Tariq Glass Industries Limited with a Jun16 TP of PKR 104/sh based on DCF methodology. The scrip provides an upside of 51%. BUY!
Our likeness for the stock primarily stems from shifting endogenous and exogenous factors. TGL’s expansion into tableware glass capacity from 220 MTPD to 250 MTPD will further increase its footings in this niche segment.
TGL’s increasing market share in float glass market will further compliment its top line. TGL Float since its initiation in FY13 was able to significantly increase its market share.
The decline in international oil prices caused local POL prices to follow suit. Since TGL relies significantly on FO and HSD for its fuel and power generation, the recent slump in Arab light (19% QoQ) is set to benefit TGL in coming quarters.
One of TGL’s old tableware furnaces is expected to remain shut for 3 months during 3QFY16. Any further delay in plant’s commencement will negatively affect the company’s earnings for FY16.
Owing to significant curtailment in tableware production during FY15, TGL significantly lost its market share to imported Chinese tableware products. Going forward, material reduction in tableware production will further deteriorate company’s market share.
Like FY13, initiation of price war in float glass market may significantly reduce TGL’s margins on float glass products which may consequently impact its earnings. However, given the rise in domestic demand and capacity cut by Ghani Global glass, the risk of another price war is implausible.