Engro Corporation (ENGRO): Earnings revised up, ‘BUY’ maintained
- We revise up our earnings for Engro Corporation (ENGRO) by 20% for 2019 to Rs35/share (earlier Rs29/share) as Engro’s 660MW Power Plant (EPTL) is expected to commence operations by Jun 2019 (earlier Jan 2020). While, early commencement of power plant (in Jan 2019) can’t be ruled out as reportedly its power plant is connected to national grid and transmission line is also tested. In case if transmission of power starts earlier in Jan 2019, then our 2019 EPS would be Rs40/share.
- To note, market was having concerns over transmission network for timely dispatch of power generation to national grid. We believe that this concern has subsided now.
- Key risks: Key risks to our valuation/earnings includes, 1) poor crop season, 2) regulatory changes in energy projects, 3) fluctuations in petrochemical margins, 4) short supply of natural gas and 5) any unprecedented delay in commencement of power plant.
- We have used Sum of the parts (SOTP) valuation methodology to value Engro Corporation (ENGRO). At current market price, ENGRO offers discount of 22% along with dividend yield of 7%. We maintain our ‘BUY’ call on ENGRO.
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.
Topline Securities is one of the fastest-growing brokerage houses in Pakistan. It has strong Equity Brokerage, Economic/ Equity Research, Commodity Trading and Corporate Finance & Advisory functions.
Topline Securities has been endowed with numerous awards by renowned international financial organizations. The highlights of which consists of the award for ‘Best Local Brokerage House of Pakistan’ by Asiamoney Brokers Poll (the largest Asia-focused equity services provider poll) in 2016 and ‘Best Equity Brokerage House’ by CFA Society Pakistan in 2015.
Previously, Topline Securities held the title for ‘Best Brokerage House’ for 4 consecutive years (2011-2014) by Asiamoney Brokers Poll. Other awards include the ‘Best Salesperson’ award by Asiamoney for 6 consecutive years (2011-2016), the ‘Arabia Fast Growth 500’ award and ‘Pakistan Fast Growth 100’ award in 2012 and 2013 by AllWorld Network.
JCR-VIS, a credit rating agency providing independent rating services in Pakistan has assigned initial rating of “A-2” for short term and “A” for long term to Topline Securities. Topline Securities is registered as Underwriter, Book Runner and Research Entity with Securities & Exchange Commission of Pakistan (SECP).
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