EFERT result review: Payout beats expectation, (AKD, Off the Analyst's Desk, Feb 15, 2021)
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AKD Research - Off the Analyst's Desk |
February 15, 2021 |
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EFERT result review: Payout beats expectation |
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- Engro Fertilizer Ltd (EFERT) announced 4QCY20 NPAT of PkR6.64bn (EPS: PkR4.97), taking CY20 NPAT to PkR18.13bn (EPS: PkR13.58), up 6% YoY. The quarterly result included certain one-offs: (i) GIDC re-measurement impact of PkR2.12bn, (ii) loss allowance on subsidy receivable of PkR1.2bn and (iii) lower effective tax rate of 8% vs. 35% in 4QCY19.
- Key highlights of the 4QCY20 result include: 26% QoQ decline in sales courtesy, dull offtake (urea/DAP down 12/59% QoQ) compared to the previous quarter, outweighed by higher gross margins of 37% (up 7.8ppt QoQ, courtesy urea and DAP price increase), and GIDC re-measurement impact.
- On YoY basis, the operating profits declined 19%, due to GIDC elimination in Jan’20, where fertilizer players passed on the benefit to consumers by reducing urea prices by PkR400/bag. Since EFERT does not record GIDC on concessionary gas, the cost of production did not witness a proportional decline, affecting operating profits negatively.
- The result announcement was also accompanied by final cash dividend announcement of PkR4.0/sh vs. our expectation of PkR2.0/sh, taking the full year payout to PkR13.0/sh. The attractive payout scenario may be marred by the upcoming end to concessionary gas agreement in Jul’21, reportedly. Our TP of PkR61.4/sh implies a Neutral stance on LDCP.
Engro Fertilizers Limited is a Pakistan-based company, which is engaged in manufacturing, purchasing and marketing of fertilizers. The Company's brands include Engro Urea, Engro NP, Engro DAP, Zingro, Engro MOP, Engro SSP and Engro Zarkhez. Engro NP is the Company's fertilizer brand with Nitrogen and Phosphorous content in equal quantity. Engro DAP primarily contains Di-Ammonium Phosphate, and is imported by Engro EXIMP and marketed by the Company. Engro DAP is marketed in approximately 50 kilogram bags. Zingro is a micronutrient fertilizer, and is imported by Engro EXIMP and marketed by the Company. Engro Zarkhez has Nitrogen, Phosphorous and Potassium, and is primarily offered for sugar cane, fruit orchards, vegetables, potato and tobacco farming. Engro Envy is primarily offered to urban market for gardens, lawns, flower beds, fruit plants and ornamental plants. The Company is a subsidiary of Engro Corporation.
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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