Intermarket Pulse: ENGRO: Diversification abound, cash to drive valuation upside; Buy
- We upgrade ENGRO to Buy with revised Dec’18 TP of PRs355/sh. New estimates now include changes in portfolio valuations (now PRs206/earlier PRs192), 6months earlier CoD of Thar projects, and investment of up to US$21mn in Siddiqson Energy.
- With diversification tracking blend of growth (polymers) and defensive attributes (fertilizers and power), ENGRO’s biggest advantage lies in its existing cash position (PRs64bn); which is not fully reflected in market valuations, in our view.
- We raise our earnings estimates for EFOODS over CY18-26F by 4.5% on avg, leading to a 5% upward revision in our Dec’18 TP to PRs80/sh (from PRs76/sh); but maintain Sell. We think the worst is over for EFOODS, where intensified focus on re-branding Tarang and growing scale in Olpers should begin to translate gradually.
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.
Intermarket Securities Limited (IMS) is a full service corporate brokerage firm based in Karachi, Pakistan. We service both domestic and international clients. IMS was ranked #2 Best Local Brokerage and #3 Best for Overall Country Research for 2016 by AsiaMoney.
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