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ENGRO_CY23 Analyst Briefing takeaways ,(AKD Off the Analyst's Desk Feb 26, 2024)

ENGRO_CY23 Analyst Briefing takeaways

Engro Corporation Limited (ENGRO) held its analyst briefing earlier today to discuss their CY23 financial results and apprise investors about their future outlook. Here are the key highlights from the call:

• To recall, company reported unconsolidated earnings of PkR17.6bn (EPS: PkR32.7) compared to PkR21.2bn (EPS: PkR39.5) in CY22, a decline of 17%YoY.
• The said decline in standalone earnings was primarily attributed to additional super tax on dividends and lower interest income, as the higher dividends declared in 1QCY23 reduced cash and equivalents.
• EFERT achieved highest-ever production and sales of urea, leading to a 64% annual growth in profitability. Management expects stable urea demand in CY24, while phosphate’s demand is expected to increase due to improved farm economics.
• EPCL witnessed a 24%YoY decline in profitability due to lower domestic PVC demand owing to overall economic slowdown. However, management foresees an uptick in PVC demand in CY24 and is exploring alternative energy sources amid gas supply constraints and rising prices.
• Engro Elengy & Vopak experienced a 28% annual decline in chemical handling due to operational disruptions amid import restrictions. Additionally, increased SSGC captive imports led to a reduction in the company's market share to 37% compared to 38% in SPLY. Despite this, profitability remained strong amidst dollar-denominated earnings.
• Engro Enfrashare expanded its tower footprint to 3,952 towers by adding 623 towers in CY23. Management mentioned that the cost per tower is ~PkR17-20mn. As per management, ENGRO has injected around PkR21bn into Enfrashare, with a debt-to-equity ratio of 60:40.
• EPQL's profitability increased by 71%YoY due to efficient operations and higher interest income.
• SECMC declared its first-ever dividend of PkR11bn after the successful completion of Phase 1 PSD in CY23. Additionally, mine expansion to 11.4mn tons is scheduled by the end of CY24.
• FCEPL's topline increased to PkR100bn (↑36%YoY), however, profit declined by 39% during the period mainly due to higher interest costs. Management expects an improvement in profitability as interest rates ease off.
• Management guided that the divestment from thermal assets aligns with the company's portfolio shift away from government-related (B2G) businesses.
• Management apprised that an accounting adjustment in the annual consolidated earnings was made due to adjustments of non-amortized loan amounts, as the debt portion of IPPs is routed through the income statement. However, on the standalone account, the company will book gains (with the sale of thermal assets) as the recoverable value exceeds the book value on standalone accounts.