FFC & HUBC_Result Previews, (AKD Daily, Jul 23, 2020)
FFC to post 2QCY20 earnings of PkR4.01/sh: Fauji Fertilizer Company Limited (FFC) is expected to post 2QCY20 NPAT of PkR5.1bn (EPS: PkR4.01), flattish YoY, but up 20% QoQ. This takes 1HCY20 NPAT to PkR9.4bn (EPS: PkR7.36), up 5% YoY. The sequential increase in earnings comes on the back of (i) 14% QoQ higher topline, led by 16% uptick in urea offtake, (ii) 1.3ppt higher gross margins of 38%, and (iii) 32% QoQ lower finance cost, courtesy lower discount rate. However, 32% QoQ decline in other income is expected to contain the earnings growth. On cumulative basis, the increase in earnings is expected on the back of: (i) 5ppt YoY higher gross margins of 37%, despite 5% YoY lower topline (urea price decline), and (ii) 33% YoY lower other expenses. However, 27% YoY decline in other income may offset the positive spillovers of aforementioned factors on the bottom line to some extent. FFC is also expected to announce a second interim cash dividend of PkR2.5/sh, taking 1HCY20 payout to PkR5.0 vs. PkR5.35 in the same period last year. Our TP of PkR127/sh implies a total return of 25% at last close - Buy.
4QFY20 earnings for HUBC to arrive at PkR4.89/sh: We expect Hub Power Company Ltd (HUBC) to post 4QFY20 NPAT of PkR6.3bn (EPS: PkR4.89), up 2.4xYoY, but down 12%QoQ. This will take the FY20 earnings to PkR24.6bn (EPS: PkR18.93), up 2.2xYoY. After a dry spell in terms of payout, HUBC is also expected to announce final cash dividend of PkR2.0/sh, based on Energy Sukuk II payment in Jun’20. The increase in FY20 earnings will be driven by: (i) uptick in gross profits due to PkR devaluation, and (ii) PkR9.23/sh or approximately 50% of FY20 earnings contribution from its 46% owned CPHGC plant. On the flipside, 56% YoY higher finance cost is expected to keep the bottomline growth in check. For 4QFY20 alone, the sequential decline is expected on the back of lower gross profits and decline in contribution of CPHGC to the NPAT, which may outweigh the impact of lower finance cost. We have a Buy stance on HUBC with our TP of PkR160/sh, where the dividend payout may be trigger price performance.
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.
Hub Power Company is a holding company. Through its subsidiaries, Co. is engaged as a power producer in Pakistan that focuses on developing, owning, operating and maintaining power stations. Co. supplies electricity to Water and Power Development Authority and National Transmission and Despatch Company under long term Power Purchase Agreements for its Hub and Narowal plants respectively.
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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