EFERT_Healthy payouts offset risks ,(AKD Daily, Dec 02, 2020)
AKD Daily
EFERT: Healthy payouts offset risks
- We revisit our investment case on Engro Fertilizer Ltd (EFERT) post release of detailed accounts. We tweak our earnings estimates to incorporate (i) tax provisions of PkR2.6bn in our CY20F EPS and, (ii) payment of GIDC dues in 48 installments, w.e.f. Nov’20, as opposed to one-off payment forecasted for CY21 (revised earnings up by 4% on average).
- EFERT also announced a 2nd interim cash dividend of PkR5.0/sh (vs. 3QCY19 DPS: PkR6.0), taking cumulative payout to PkR9.0/sh (9MCY19 DPS: PkR11.0). Going forward, we maintain our payout ratio at 100% of NPAT, translating into CY21/22F D/Y of 12.89/12.89%.
- A downside risk to our estimates however, is the payment of GIDC on concessionary gas since CY15, which is still a sub-judice matter. That said, EFERT remains shielded against sector headwinds (budgetary measure of 10% expense disallowance for sales to unregistered dealers).
- We upgrade our stance on EFERT to Neutral, with our TP of PkR59/sh implying a total return of 9.6% at last close.
AKD Research
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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