• Pakistan’s meat and meat product exports reached a record high of US$512 million in FY24, up 20% year-on-year from US$426 million in FY23.
• Export volume also surged by 24% to 124,000 tons compared to 100,000 tons in the previous year.
• The United Arab Emirates (UAE) and Saudi Arabia remain the top destinations for Pakistani meat exports, accounting for 39% and 28% of the total market share, respectively.
• TOMCL (The Organic Meat Company Limited), the second-largest meat exporter in Pakistan, reported impressive sales growth of 60% in USD terms during FY24.
• The company is projected to see a further increase in capacity utilization to 70% in FY24, up from 45% in FY23.
• TOMCL is currently trading at a significant discount compared to the food industry average, presenting a potential investment opportunity.
• Recent change in tax laws can result in EPS dilution

Pakistan Meat Exports

• Record Performance: Pakistan’s meat and meat product exports reached a record high of US$512 million in FY24, reflecting a 20% year-on-year growth.
• Volume Increase: Export volume also witnessed a significant surge of 24%, reaching 124,000 tons in FY24 compared to 100,000 tons in FY23.
• Price Decline: Despite the growth in volume and value, the average meat price in the international market declined slightly from US$4.3 per kg to US$4.1 per kg.
• Market Diversification: While the UAE and Saudi Arabia remain the dominant markets, Pakistan is experiencing growth in exports to other countries like Kuwait, Qatar, Uzbekistan, Vietnam, and Kazakhstan.

TOMCL Performance

• Strong Sales Growth: TOMCL, the second-largest meat exporter in Pakistan, reported remarkable sales growth of 60% in USD terms during FY24.
• Capacity Expansion: The company’s capacity utilization is expected to reach 70% in FY24, up from 45% in FY23, indicating potential for further export growth.
• Product Diversification: Beyond fresh chilled beef, TOMCL is venturing into new product lines such as pet chews and cooked meat products.

Sector Performance

• The food and personal care products sector in Pakistan has a current market capitalization of Rs. 1,087 billion and a turnover of 27.0 million shares.

Market Risks

• Overdependence on Key Markets: The high reliance on the UAE and Saudi Arabia for exports makes Pakistan’s meat industry vulnerable to any downturns in these markets.
• Competition: The increasing competition from other meat exporters could affect Pakistan’s market share in the future.
• Price Volatility: Fluctuations in international meat prices can impact export revenue.
• Tax Regime Change: The recent shift in the tax regime for the meat sector might influence profitability.

TOMCL as  Investment Case ?

• Undervalued: TOMCL is currently trading at a P/E of 6x for FY25 and a P/BV of 1.1x, which is significantly lower than the food industry average, presenting a potential investment opportunity.
• Growth Prospects: TOMCL’s long-term contracts in the UAE and expansion into new product lines are positive indicators for future growth and profitability.

Overall, the Pakistani meat export industry is demonstrating promising growth, driven by increased demand from key markets and the strong performance of major players like TOMCL. However, some potential risks, including market dependence, competition, price volatility, and the recent tax regime change, need to be considered.

Source:  Sherman Securities