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TGL - Analyst Brifing Takeaway, (AKD Off the Analyst's Desk Oct 27, 2023)

AKD, Off the Analyst's Desk

TGL - Analyst Brifing Takeaway

 

TGL’s earnings for 1QFY24 clocked in at PkR759mn (EPS: PkR4.41/sh), reflecting an increase of 115%YoY (EPS in 1QFY23: PkR2.05/sh). Topline for the company during 1QFY24 stood at PkR6.9bn, registering an increase of 7.5%YoY. Today, TGL organized its corporate briefing session where the following points were discussed:

• Company has established a 1MW solar plant and plans to make further expansions considering high energy costs and the need to shift towards renewable energy sources.
• In terms of COGS, there were economic and legislative factors which have affected the company’s profitability. Average RLNG price increased by 31%, electricity tariff increased by 49%, RFO price increased by 26%, and HSD price increased by 91%. Moreover, raw material prices for soda ash and silica sand also rose by 36% and 28%, respectively.
• TGL has two sources of fuel including RFO and RLNG, with no dependence on natural gas. Silica sand makes up 50% of the raw material costs which is not dollarized. However, packaging material, which is another component of the cost of goods sold, is dollarized.
• According to company’s management, glass demand is positively correlated with steel and cement demand. Overall, only two production plants are operational, out of total five.
• Last year’s production of 950k MT is segmented into 65% for float and 35% tableware. The float plant was temporarily closed due to reduced demand but is scheduled to reopen soon. Meanwhile, the tableware plant is currently undergoing maintenance, which is expected to last for 3-4 months.
• In terms of volumetric numbers, inventory has seen a decline which due to overall inflationary pressures.
• Investments in BGL include 3 plants where the first plant is supposed to inaugurate at Hub Chowki, Karachi. Plan is to move into the pharmaceutical bottles considering the segment’s promising market and demand growth.
• According to the company’s management, the recent gas price hike will have no effect on the company’s product pricing where the company is already using RLNG which is hedged against the US$. However, companies in the South and KPK will be impacted by increase in gas prices.
• The third float plant joint venture with Lucky Core is set on hold for now, keeping in line with regressed market conditions.
• Taking into account the 20/80 ratio with blended gas rates/RLNG, the company will benefit from the reduction in gas price by PkR200-300/mmbtu which the company believes is not a drastic impact.
• PkR appreciation will have no effect on product prices because soda ash and gas prices did not see a decline. Hence, the company cannot adjust its prices downward regardless of the currency appreciation.
• In acquiring BGL, TGL is expecting to benefit from inclusion of pharmaceutical bottles in its portfolio and also the advanced machinery which BGL already holds.

 

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