PABC outlook weakens amid Afghan border shutdown

December 05, 2025 (MLN):  Pakistan Aluminium Beverage Cans Limited (PSX:PABC) faces a target price of Rs124, down 5% from Rs130, as the prolonged Pakistan-Afghanistan border closure continues to severely impact the company's export-dependent business model.

JS Global Capital Limited has reiterated its SELL rating on the stock, which closed at Rs128.06 on Thursday.

The downward revision comes as JS Global incorporated a three-month border closure scenario into its projections, slashing its CY25 earnings per share (EPS) estimate for PABC by 16% to Rs17.39.

The border has remained shut since October 11, 2025, with no meaningful progress toward resumption despite multiple rounds of talks mediated by Qatar, Turkiye, and Saudi Arabia.

PABC's business model is heavily reliant on Afghanistan and Central Asian markets, which contribute over 50% to the company's top-line revenues.

The company's production capacity of 1.2bn cans far exceeds Pakistan's domestic annual demand of just 0.3-0.4m cans, making export markets critical to its operations.

The border closure has reduced PABC's sales to nearly half in the fourth quarter of CY25, with exports plummeting to just Rs450m compared to Rs5.1bn in 2QCY25.

A sensitivity analysis shows that every one-month suspension of trade results in a 5% reduction in PABC's CY26 EPS estimates.

A three-month closure would translate to a 15% cut, while a full-year suspension could devastate earnings by 59%, bringing the implied price-to-earnings ratio to 14.18x from the base case of 5.75x.

"Since disruptions in Pak-Afghan trade have become more frequent than in the past, and with no long-term clarity on the situation, we believe investors should price in this elevated risk," according to JS Global

Despite the current challenges, PABC's Board of Directors has approved plans to construct a 1.3bn-can aluminum manufacturing facility in Afghanistan with an expected project outlay of $110m and a construction timeline of 1.5-2 years.

However, brokerage house highlighted a critical vulnerability in this expansion: as Afghanistan is landlocked, the new plant would remain dependent on Pakistan's transit trade for aluminum scrap imports the key raw material.

This means prolonged border closures would continue to pose significant risks even after the facility becomes operational.

The new facility is expected to tap into Afghanistan's 1.8bn beverage packaging market and serve existing customers who currently import 500-600m cans annually from PABC's Pakistani operations.

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