Karachi, According to a research report by JS Securities Limited, Pakistan Aluminium Beverage Cans Limited (PABC), the nation's exclusive aluminium beverage can manufacturer, presents a promising investment opportunity. The company has been assigned a Buy rating with a target price of Rs70. PABC's revenue sources are almost equally divided between domestic and regional markets. Both these markets not only remain under-penetrated but are also projected to expand faster than global averages.

JS Securities' favourable view on PABC is based on the company's optimal capacity, market positioning, and penetration potential. PABC is poised to tap into new markets, including prospective long-term supply contracts with giants like Pepsi or Coca Cola in Bangladesh. Domestically, the company is well-positioned to cater to a resurgence in volumes after the current economic slowdown.

A structural advantage arises from the global shift towards recyclable packaging. Currently, cans constitute less than 5% of the packaging for sparkling soft drinks in Pakistan. This is in contrast to a 25% global average in recyclable packaging and The Coca Cola Company's ambitious target of reaching a 50% threshold by 2030.

JS Securities also emphasized PABC's robust operating income, driven by dollar-based cost-plus pricing, increasing export contribution, diminishing financial charges, and tax incentives. This combination potentially positions PABC to report an approximate 20% EPS CAGR over CY23-27E.

The research suggests that the stock offers roughly a 40% upside from its present levels, coupled with a 13% CY24E dividend yield. As of June 2023, PABC holds cash and equivalents amounting to Rs3.8 billion (Rs10.5 per share). However, investors should be aware of potential risks, including a prolonged border closure with Afghanistan and a slower-than-anticipated recovery in domestic demand.