Faisalabad: Pakistan Aluminium Beverage Can Ltd (PABC) has updated its investment stance from "Buy" to "Hold" after the stock's price increased by over 50% since October 2023. This adjustment comes in response to recent budgetary changes that have significantly altered financial forecasts for the company, decreasing the target price from Rs95 to Rs80.

According to JS Global, the reassessment was triggered by a 50% rally in PABC’s share price since the previous evaluation and recent fiscal measures introduced by the government. These developments have compelled a downward adjustment in PABC's target price, constricting the forecasted upside of the stock. The research report details several changes in estimates for coming years, highlighting a shift in earnings expectations due to the new budgetary framework. In the fiscal year 2025, the government will transition PABC to a normal income tax rate from a fixed turnover tax, which is expected to reduce the company's earnings by 23% from CY27 onwards.

PABC, located within a Special Economic Zone (SEZ) in Faisalabad, has been benefiting from a 10-year income tax holiday that will conclude in September 2027. Adjustments to the tax regulations, including the exemption from the minimum turnover tax for SEZ entities until December 2026, are projected to positively influence PABC's earnings per share (EPS) for CY25-26 by 6%.

Despite these fiscal adjustments, JS Research anticipates a sluggish recovery in domestic can sales in the second half of CY24, influenced by ongoing inflationary pressures which have dampened consumer purchasing power. The long-term forecast is more optimistic, expecting a gradual recovery in demand starting from CY25.

PABC also awaits a judicial decision regarding turnover taxes paid from June 2022 to June 2024. A favorable ruling could result in a significant one-time earnings boost, estimated at Rs820 million, or Rs2.2 per share, which would represent a 17% increase to CY24E EPS.