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SYS & FATIMA - CY22 Result Previews, (AKD Daily, Mar 16, 2023)

SYS – Expected EPS of PkR6.6 in 4QCY22: We expect Systems Limited (SYS) to post NPAT of
PkR1.9bn in 4QCY22, remaining flat on a yearly basis while decreasing by 11%QoQ. Hence, CY22
is expected to close with PkR7.0bn earned, culminating to an EPS of PkR24.2. Revenue for
4QCY22 is expected to clock in at PkR9.4bn (+96%YoY) owing to growth in operations along with
hefty Rupee depreciation. This will take Revenue for CY22 to PkR29.5bn, nearly doubling YoY.
Gross margins are likely to improve to 31.7% in the fourth quarter vs. 31.2% in 3QCY22 as operations
get further optimized, while margins for CY22 are expected to see a drop of 1ppt to clock
in at 31.6% owing to recent acquisitions and expansions into new regions. Operating Profit is
likely to post at PkR1.9bn, multiplying by 2.2x on a yearly basis while recording an increase of
15%QoQ. Other Income is expected to clock in at PkR251mn in the final quarter of the year, a
decline of 67%QoQ on the back of a stable PkR/USD parity leading to minimal exchange gains
being recorded, with minor exchange losses also possible. We further expect a dividend payout
of PkR7.5/sh to be announced along with the annual results, culminating to a payout ratio of
31% as the company looks to retain cash to fuel further organic and inorganic growth.
FATIMA – 4QCY22 earnings expected at PkR3.3/sh: We expect Fatima Fertilizer Company Limited
(FATIMA) to post a NPAT of PkR6.9bn (EPS: PkR3.3) in 4QCY22, taking total earnings for
CY22 to PkR16.8bn, an EPS of PkR8.0. This culminates into a decline of 9%YoY, mainly on the
back of higher taxation owing to the Supertax applicable in CY22 (an expected ETR of 54%).
Earnings for the final quarter of the year show an improvement of 69%QoQ as offtakes for the
quarter rose, boosting Revenue by 30% when compared to 3QCY22 with the contribution from
NP offtakes being significant due to the nutrient being a higher priced product. Margins for the
quarter are expected to clock in at 35.9%, an increase from the 35.1%/26.8% recorded in
3QCY22/4QCY21. FATIMA is likely to post an Operating Profit of PkR12.4bn in 4QCY22, taking
total for the year to PkR44.0bn, recording an increase of 29%YoY. Other Income is expected to
increase by 10%QoQ to PkR627mn, helping offset the increase in finance costs. Taxation in the
quarter is likely to return to normalcy with an ETR of 33%, clocking in at PkR3.4bn for the quarter.
We expect the company to announce a dividend of PkR3.25/sh for the closure of the year,
assuming a payout ratio of 41% for the year, in line with the company’s payout strategy for the
last two years.