FrieslandCampina Engro Pakistan (FCEPL): 2QCY19 LPS Rs0.42, Vs. EPS of Rs 0.27 (Below expectations)
- FCEPL (Formerly EFOODS) posted LPS of Rs0.42 in 2Q2019, contrary to our expectations due to lower than expected gross margins and higher finance cost.
- However, the company’s net sales, witnessed increase of 22% YoY. We attribute higher sales to higher prices and volumes, in our view.
- The company posted gross margins of 15%, down by 5ppts during 2Q2019. This was mainly due to inflationary pressure, and higher imported raw material cost on the back of PKR devaluation (14% in 2Q2019).
- FCEPL’s distribution expenses were down by 15% YoY to Rs 1.1bn owing to lower marketing expense. This was due to higher base in last year as the company have been aggressive in media campaigns to re-position its Olpers and Tarang brands.
- Financial charges were up by 81% YoY owing to increase in the policy rates. While on QoQ basis, finance cost increased amidst increase in short term borrowings.
- We flag, 1) rising competition, 2) decline in processed milk consumption, 3) any unanticipated regulatory changes, and 4) volatility in international raw milk prices as key risks for FCEPL.
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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