Engro Corporation Limited (ENGRO)

Dear Clients,

– Engro Corporation Limited (ENGRO) reported 1QCY21 result today posting Profit after Tax (PAT) of PkR8.3bn (EPS: PkR14.5, up 151% Y/Y). The result is in line with street consensus.

– The result was accompanied with an interim cash dividend of PkR12.0/sh.

– We attribute the increase in profitability to fertilizer business. EFERT’s profitability clocked in at PKR 5.7bn (EPS: PkR 4.3), registering a significant increase of 10.1x as a result of i) increase in urea volumes due to low base effect and ii) increase in fertilizer prices.

– Furthermore, profitability of Engro Polymer & Chemicals Limited (EPCL) also grew by 21x to PkR4.1bn (EPS: PkR 4.6), accredited to higher PVC margins and volumes.

– Additionally, Frieslandcampina Engro Pakistan Limited (FCEPL) reported profit of PkR 623mn (EPS: PkR 0.71) in 1QCY21 as compared to a loss of PkR 251mn (LPS: PkR 0.17). This is attributed to i) recovery in gross margins to 20% and ii) reduction in finance cost due to lower policy rate.

– Engro Powergen Qadirpur Pakistan Limited (EPQL) posted earnings of PkR 399mn (EPS: PkR 1.23), down by 55% Y/Y, in 1QCY21 compared to PkR 895mn (EPS: PkR 2.77) in corresponding period last year.

– We believe that other businesses (Elengy, EPTL and SECMC) have also lent support to the bottom-line.

– Similarly, contribution from the Thar business (EPTL & SECMC) during 1QCY21 is projected at PKR 2,493mn.

– Our target price for ENGRO stands at PkR 412/sh. The stock offers an upside of 35% and trades at a CY21 PE of 6.3x. We believe the stock has considerable upside potential on account of the company’s healthy balance sheet, and the management‘s ambition for growth.

KASB Research

Share on facebook
Share on twitter
Share on linkedin

You may also like

Leave a comment

Your email address will not be published. Required fields are marked *

Categories

Recent Blogs

Archive

Follow Us