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EFERT 1QCY23 & MLCF 3QFY23 - Result Previews ,(AKD Daily, Apr 12, 2023)

AKD Daily

 

EFERT 1QCY23 & MLCF 3QFY23 - Result Previews

 

EFERT – 1QCY23 earnings to clock in at PkR2.9/sh: We expect Engro Fertilizers Limited (EFERT) to post a NPAT of PkR3.9bn (EPS: PkR2.9) in 1QCY23, a decline of 29%YoY and 39%QoQ. Revenue for the quarter is likely to clock at PkR41.3bn, an increase of 12%YoY on the back of higher prices for product offerings. On the flipside, Revenue will be recording a decline of 10%QoQ due to DAP sales reducing by more than half when compared to 4QCY22, although slightly offset by higher urea offtakes. Margins for the quarter are expected to increase to 25.8%, an increase of 290bps compared to the previous quarter, as higher urea prices along with relatively improved fixed-cost absorption supported profitability for the quarter. EFERT is likely to record an operating profit of PkR7.3bn, up by 14%QoQ when compared to PkR6.3bn posted in the last quarter as Selling & Distribution expenses are likely to normalize back down. Profit before Taxation for the quarter is expected to clock in at PkR5.9bn, up by a mere 6%QoQ as higher Finance costs (PkR1.1bn) owing to higher ST borrowings along with lower Other Income (PkR732mn) are likely to partially offset the benefits of better gross margins in 1QCY23 as compared to SPLY. After a tax reversal of PkR888mn in the last quarter, taxation is expected to normalize and clock in at PkR1.9bn with an ETR of 33%. We expect the company to announce a dividend of PkR3.0/sh for the first quarter of the year, although the possibility of a payout ratio higher than 100% cannot be ruled out given the company’s recent history.

 

MLCF – 3QFY23 EPS to stand at PkR2.0: Maple Leaf Cement Factory Limited (MLCF) is scheduled to announce its 3QFY23 result on 17th April, where we expect the company to record PAT of PkR2.1bn (EPS: PkR2.0) compared to PAT of PkR2.3bn (EPS: PkR2.2), a decline of 10%QoQ while a yearly increase of 78%. MLCF’s topline attrition on a sequential basis can be attributed to the lower offtakes during the period, wherein the company experienced 7%QoQ drop in offtakes. In comparison, industry sales in the Northern Region posted a negative growth of 8.6%QoQ, with MLCF’s relative outperformance driven by the commissioning of the Line IV expansion. Furthermore, we expect company gross margins to clock in at 29.9% vs 29.4% in 2QFY23, slight improvement in the margins is expected due to price increase during the quarter, where retention price rose by 2% despite the imposition of additional 1% GST and FED increase (PkR100/bag vs PkR75/bag earlier) in mid Feb’23. Moreover, finance cost of the company is expected to clock in at PkR761mn (up by 25%/54% QoQ/YoY) owed to increased borrowing and higher interest rates. Overall, this takes 9MFY23 NPAT to PkR5.7bn (EPS: PkR5.3) against NPAT of PkR3.6bn (EPS: PkR3.3) in SPLY. We have a “Buy” call on the stock, with a Dec’23 Target Price of PkR38/sh, culminating to a potential upside of 44% from the last close.

 

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