ENGRO: Analyst Briefing Highlights
Engro Corporation Limited (ENGRO) held its analyst briefing yesterday to shed light on its financial results for CY19. The company’s earnings jumped by 30% YoY to PKR 28.69/sh in addition to a total dividend payout of PKR 24.00/sh.
ENGRO’s 4Q earnings were lower than industry estimates due to several one-offs including FCEPL’s impairment, Vopak’s tax adjustment, SAP implementation costs, HR training and development costs, IFRS 16’s implementation, and project feasibility costs. These one-offs caused ENGRO’s other expenses to surge by 5x QoQ to PKR 4,787mm during 4QCY19.
ENGRO plans to expand its footing within the telecom tower space. The company has invested PKR 7.5bn for 1,500 towers and plans to increase it to 10,000 towers within a span of 2 years, targeting a market share of 25%.
The management foresees the benefits from the removal of tax on inter-corporate dividends to be fully realized from CY20 onwards.
While discussing its fertilizer business, the management emphasized its resolve on maintaining fertilizer prices at PKR 1,840/bag to ensure consistent profitability. The company, however, feels that the premium it currently charges may not be sustainable in a competitive pricing environment.
ENGRO conveyed that its SECMC and Engro Powergen Thar projects are operating smoothly, with the coal mine supplying 2.3mn MT during CY19. ENGRO’s management also stated that it has commenced construction on SECMC Phase 2, which is expected to enhance the mine’s production capacity to 7.5mn MT.
We maintain our positive stance on ENGRO due to the company’s healthy balance sheet in addition to its planned investments anticipated to provide a diversified & lucrative stream of revenues.
Engro Corporation is an agri based company. Co.'s core business is the manufacturing, purchasing and marketing of chemical fertilizers and seeds. Co. is engaged in the production of Urea fertilizer in Pakistan which is manufactured at Daharki and marketed under brand name Engro. Co. also maintains a seed business and is marketing imported hybrid and open pollinated seeds of maize and sunflower crop under the brand name of Bemisal. Co. has investments in joint ventures engaged in chemical terminal and storage, PVC resin manufacturing and marketing and Automation and Controls businesses.
BMA is amongst the leading financial groups in Pakistan. BMA Capital’s core areas of business include Capital Markets, Corporate Finance & Advisory, Asset Management, and Financial Products Distribution. BMA Capital is the leader in privatisation advisory in Pakistan, having successfully advised on over 50% of all privatisations in Pakistan, by value, in transactions valued in excess of US$4 billion. Recent transactions include joint lead managing the $813 million GDR Offering of 10% of OGDCL on the London Stock Exchange in 2006-07, and advising Etisalat on their successful acquisition of a 26% strategic stake in Pakistan Telecommunications Company Limited (PTCL) for US$2.6 billion, the largest M&A transaction and foreign direct investment in Pakistan’s history. The firm is among the top brokers in the Pakistan equity and treasury markets, and is among a handful of firms that comprehensively cover all segments of the capital markets. This is supported by a very strong and independent research capability, which is quoted regularly in both local and international media. BMA Capital’s retail brokerage brand, BMA Trade, has launched a nationwide network of branches as well as a comprehensive online trading platform, enabling investors across Pakistan to take part in the capital markets.
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