EPCL_ Fundamentals turn grey, (AKD Daily, Aug 22, 2022)
Fundamentals turn grey
Engro Polymer & Chemicals Limited has provided total return of ~44% since the start of
CY22, amid high PVC-Ethylene core delta and attractive payout. However, we are downgrading
our rating for EPCL to HOLD due to steep decline in PVC core delta, upcoming hike
in gas tariff and general slowdown in economy.
PVC prices reached US$630/ton in Apr’20 attributable to COVID related lockdown and
supply chain restrictions. However, PVC prices started to recover in 2HCY20, amid supply
side issues and earlier than expected easing of lockdown in Asian region. PVC prices
touched high of US$1,850/ton in Oct’21 mainly attributable to tight supply. However, just
like other commodities, PVC prices also started to decline and currently stands at
US$1,000/ton, amid monetary tightening in economies across the globe and pileup of
inventories.
Upcoming hike in gas tariff will further erode company’s earnings as company follows
import-parity based pricing strategy and will be unable to pass on increase in gas cost.
We have HOLD rating on the stock with TP of PkR67.6/sh, depicting total return of ~17%.
Our revised earnings of PkR14.97/8.48 per share for CY22F/23F, implying P/E of
4.4x/7.8x.
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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