EUR 9.28 For Business Accounts Only

NML_3QFY17, FFBL & EFERT_1QCY17 Result Previews

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NML is scheduled to announce 3QFY17 result on Saturday (Apr 22'17) where it is expected to post NPAT of PkR1,176mn(EPS:PkR3.35), up 17%YoY, primarily due to anticipated higher dividend income (+101%YoY) from associated companies. However despite anticipated topline growth (+10%YoY), NML core business profitability is likely to shrink 31%YoY in 3QFY17 largely on account of declining gross margins ( down 179bpsYoY to 12.66%) with the steepest decline expected in the value-added segment. Following quarterly trend, NML's earnings during 9MFY17 are likely to witness an upward trend (+4%YoY) to stand at PkR3,727mn(EPS:PkR10.6) vs. PkR3,567mn(EPS:PkR10.15) in 9MFY16. While increase in earnings during 9MFY17 is attributable to 27%YoY surge in other income, NML's core business earnings are expected to contract significantly by 44%YoY due to shrinking gross margins(-202bpsYoY) and subdued topline growth(+5%YoY). Amid lingering tax refunds (~PkR300bn) due to textile sector and declining 8MFY17 exports (-1.6%YoY), NML's market performance remained lackluster (CYTD +4%). Our SOTP based TP of PkR186/sh offers 14% upside. Accumulate!

FFBL is scheduled to announce earnings for 1QCY17 on Monday (Apr 24’17) where we expect the company to post net loss of PkR97mn (LPS: PkR0.10) in 1QCY17F vs. net loss of PkR514mn (LPS: PkR0.55) in 1QCY16. This recovery in loss is expected on the back of: 1) 19%YoY recovery in topline to PkR5.24bn reflecting 54%YoY expected increase in DAP off-take to ~109k tons and 1) 12.5ptsYoY improvement in GM to 12.7% (including subsidy) in 1QCY17 due to significant decline in phosphoric acid prices (down 23%YoY) limiting the effect of significant reduction in DAP prices (down 12%YoY) due to depressed international price trends (down 4.1%YoY to stand at an average US$323/ton in 1QCY17). Despite encouraging volumetric growth seen from 4QCY16, we feel an improvement in international pricing dynamics would be necessary for improvement of the earnings trend, going forward. Our Dec'17 SOTP-based TP stands at PkR54.8/sh (upside: 4%), advocating a Neutral stance.

EFERT is scheduled to announce its 1QCY17 financial results on Monday (Apr 24’ 17), where we expect EFERT's earnings to clock in at PkR1.19bn (EPS: PkR0.90) - down 44%YoY. The decline in earnings is expected on the back of: 1) GM coming off by 6ptsYoY to 33.2% (includes subsidy) on account of reduction in Urea prices (down 9%YoY) due to depressed farm economics and low international price trends (down 10%YoY to stand at an average US$210/ton in 1QCY17). Having lost 8%CYTD due to poor earnings performance in CY16, the stock currently trades at CY17F PE of 8.8x where our Dec'17 TP of PkR72.1/sh offers an upside of 15.4% from current price level. Accumulate!