EPCL: 3QCY19 Analyst Briefing Takeaways
- Engro Polymer Chemical Ltd (EPCL) held its analyst briefing yesterday to discuss the financial performance during 9MCY19 (EPS: PKR3.12, down 26% YoY). For 3QCY19 only, EPCL posted 20% YoY higher NPAT of PKR1.3bn (EPS: PKR1.43); on sequential basis, the earnings were up by 2.9x, courtesy absence of one-off FX losses recorded in 2QCY19.
- The PVC and caustic soda volumetric sales witnessed a 4.6% YoY decline during 9MCY19. This was more than offset by PKR devaluation leading to 9%YoY higher topline.
- However, (i) 336 bps YoY decline in gross margin to 23.3%, (ii) 2.3x YoY higher other operating expenses, (iii) 2.64x YoY higher finance cost and, (iv) higher effective tax rate of 26% during the period vs. 22% in 9MFY18, dragged 9MCY19 bottomline.
- EPCL has also implemented IFRS 15 and 16 effective Jun’19, where the latter will adversely impact earnings on a recurring basis due to recognition of lease liability. Meanwhile, IFRS 15 implementation will keep the GMs depressed due to reclassification of distribution expense as COGS.
AKD Research
Engro Polymer & Chemicals Limited is a chlor vinyl chemical company. The principal activity of the Company is to produce and market chlor-vinyl products, which include poly vinyl chloride (PVC), vinyl chloride monomer (VCM), caustic soda, hydrochloric acid and sodium hypochlorite. The Company operates through three segments: poly vinyl chloride (PVC) and allied chemicals, caustic soda and allied chemicals, and power supplies. The poly vinyl chloride (PVC) and allied chemicals segment manufactures and sells PVC and allied chemicals to various industrial customers, including pipe manufacturers, shoe and packaging industry. The caustic soda and allied chemicals segment manufactures and sells caustic soda and allied chemicals to textile and soap industry. The power supplies segment supplies surplus power generated from its power plants to Engro Fertilizers Limited. The Company manufactures and markets over four grades of PVC under the brand name SABZ.
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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