EFERT: Earnings jump in 4QCY19, (AKD, Off the Analyst's Desk, Feb 17, 2020)
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EFERT: Earnings jump in 4QCY19 |
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§ Engro Fertilizers Ltd (EFERT) announced 4QCY19 NPAT of PkR6.4bn (EPS: PkR4.76), up 91%/23% QoQ/YoY. This takes CY19 NPAT to PkR16.8bn (EPS: PKR12.63), down 3% YoY. The company also announced final cash dividend of PkR2.0/sh, taking the full year CY19 payout to PkR13.0/sh. § The NPAT was in line with our expectation. However, deviations were witnessed at gross margins level, with potentially higher than expected trading business GMs. On the other hand, effective tax rate of 35% also remained above our expectation of 28%, potentially due to further reversal of deferred tax, neutralizing the impact of expectations beat at gross level. § The YoY decline in CY19 earnings is on the back of (i) 83% YoY higher operating expenses, (ii) 88% YoY higher finance cost amid policy rate hikes over the last year and, (iii) higher effective tax rate of 38% (vs. 28% in the same period last year) due to reversal of deferred tax booked in CY18. § For 4QCY19 alone, the sequential uptick in NPAT comes from (i) 39% QoQ higher offtake leading to 61% increase in topline, (ii) 106bps QoQ higher GMs led by higher urea retention price (effective Sep’19) and (iii) lower effective tax rate of 35% vs. 44% in 3QCY19. § Our TP implies a total return of 26.5% at last close, implying a Buy stance. However, our estimates do not incorporate the recently notified urea price (PkR160/bag reduction) and GIDC elimination. The company may have to reduce urea prices at par with FFC - by PkR300/bag to push urea offtakes, which will translate into a negative EPS impact of 27%, even after eliminating GIDC. |
AKD Securities Ltd. is one of the leading securities firm in Pakistan, providing a comprehensive range of investor focused services, including equity brokerage, economic and securities research, investment banking and financial advisory services. AKD Securities accounts for more than 6% of the average daily value of the Karachi Stock Exchange. AKD Securities was the first brokerage house to launch an online trading platform in Pakistan in November 2002 and now has the largest market share with over 6000 customers. This has helped diversify and expand the retail investor base in the country and ushered in a whole new universe of investors to the stock market.
AKD Securities Ltd. caters to a diversified group of domestic and international institutional investors, high net worth individuals and upscale retail clients, including expatriate Pakistanis. With high quality research, unparalleled execution and distribution capability for both regular and large block trades, AKD Securities Ltd. has earned an outstanding reputation in the Pakistani securities industry.Outside of commercial banks, AKD Securities Ltd. is one of the biggest capital market firms in the country. AKD Securities is the leader in raising and providing risk capital in underwriting, market making and mergers and acquisitions in Pakistan. Good corporate governance and professionalism are emphasized throughout the firm and AKD Securities Ltd. is amongst the very few companies to have introduced a firm-wide comprehensive CODE of ETHICS, overseen by an independent compliance manager.Ultimately, our success is based on the quality of service we provide to our customers and the trust and confidence reposed in us by them. Our focus, therefore, remains on customer satisfaction at all levels in the company.
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