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EPCL - FY23 Analyst Briefing Takeaway, (AKD Off the Analyst's Desk Oct 20, 2023)

AKD, Off the Analyst's Desk

 

EPCL - FY23 Analyst Briefing Takeaway,

 

Engro Polymer & Chemicals Limited (EPCL) held its analyst briefing today to apprise investors on the 9MCY23 result and future outlook. To recall, EPCL posted PAT of PkR5.4bn (EPS: PkR4.5) in 9MCY23 vs. PAT of PkR9.3bn (EPS: PkR7.7) in SPLY, down by 76%YoY.

 

• Net sales for the nine-month period amounted to PkR62bn, remaining stable on an annual basis, where the impact of increased volumes was offset by low PVC international prices. However, a 76%YoY drop in earnings during this period is primarily attributed to a decline in the core-delta, adverse budgetary impacts, and overall inflationary pressures.
• In 9MCY23, PVC and chlor alkali sales volume reached 169k/59k tons, respectively. Additionally, the company exported 9k tons of PVC and 4k tons of chlor alkali products. The company achieved its highest-ever exports in the nine-month period, with a total inflow of US$23mn. Management is committed to sustaining this momentum.
• During the previous quarter, EPCL's PVC sales volume increased to 68k tons, a 39% QoQ rise compared to 49k tons in the preceding quarter. Meanwhile, sales volume of caustic soda liquid/flakes was 19k/4k tons, respectively, remaining largely flat QoQ.
• Looking ahead, assuming economic stability persists, the company anticipates a consistent level of sales demand. Additionally, EPCL will continue exploring export opportunities to maintain optimal production levels.
• On the pricing front, international PVC prices declined at the end of the previous quarter due to lackluster demand from India and China. Management expects PVC pricing to remain subdued due to supply surplus and a global economic slowdown.
• Meanwhile, ethylene prices are expected to be impacted by international crude oil prices, potentially keeping the core delta under pressure. Current core-delta margins stand at US$290/ton based on spot prices.
• Management acknowledges that the anticipated gas price increase poses a significant challenge going forward, impacting gross margins. To note, 80% of the company's gas consumption is used for captive power generation.
• On ongoing projects, management informed that the High Temperature Direct Chlorination (HTDC) and Hydrogen Peroxide (HPO) projects are scheduled to be commissioned in early CY24. As per management estimated, the HPO project would contribute ~PkR1.0bn to the bottom line after reaching full production. It's worth noting that HPO production requires a 6-month run for optimal production.

 

 

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