EPCL & FFC - 1QCY21 Result Previews, (AKD Daily, Apr 16, 2021)
AKD Daily
EPCL & FFC - 1QCY21 Result Previews
EPCL to post 1QCY21 EPS of PkR4.24: Engro Polymer & Chemicals Ltd’s (EPCL) board is scheduled to meet to today announce its financial result. We expect EPCL to post 1QCY21 NPAT of PkR3.90bn (EPS: PkR4.26), as compared to PkR193mn (EPS: PkR0.21) in the same period last year. To recall, EPCL’s PVC production and sales took a hit in 1QCY20 due to plant disruption. On YoY basis, (i) 91%YoY increase in revenues, (ii) gross margins expected to clock in at 44% vs. 18% in 1QCY20 amid 63% YoY increase in PVC ethylene margins (1QCY21 average: US$845/MT), and (iii) 44%YoY lower finance cost is expected to result in significant jump in earnings. On sequential basis, the earnings are expected to post a modest 7% increase. Key highlights would include: (i) 9%QoQ increase in revenues, (ii) decline in gross margins by 4ppt, (iii) 165%QoQ increase in other income to be offset by 17%QoQ higher finance cost. While 100K MT PVC line III has come online in early Mar’21, we have assumed PVC sales to remain at 51K MT, where VCM debottlenecking in next quarter would enable EPCL to unlock its PVC production capacity. Our TP of PkR72/sh implies an upside of 24% from last close – Buy!
FFC to post 44%YoY higher EPS of PkR4.81: Fauji Fertilizer Company Ltd (FFC) is expected to announce 44% YoY higher NPAT of PkR6.12bn (EPS: PkR4.81) in 1QCY21. The YoY increase earnings is majorly expected on the back of 81%YoY increase in other income, courtesy dividend announced by AKBL and, increase in short term investment in anticipation of commencement of GIDC payments as per Supreme Court’s Aug’20 verdict. While revenues are expected to remain stagnant, we expect gross margins to increase 2ppt YoY due to lower gas rates as compared to the same period last year. On sequential basis, the earnings are expected to decline 13%, due to absence of re-measurement impact of GIDC liability of PKR4.94bn recorded in the previous quarter (netting off one off impairment loss of PkR1bn; EPS impact PkR2.22). The company is also expected to announce first interim cash dividend of PkR3.0/sh vs. PkR2.5/sh in the same period last year. Our TP of PkR131/sh implies a Buy stance at last close.
AKD Research
Fauji Fertilizer is engaged in the manufacturing, purchasing and marketing of fertilizers including the investment in other fertilizer manufacturing operations. As of Dec 31 2004, Co. had a design capacity of 2,455,000 tonnes for urea production and 445,000 tonnes for DAP production.
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