International Steels (ISL): 2QFY19 EPS Rs2.09, -23% YoY; +8% QoQ; DPS Rs1.5 (Above expectations)
- International Steels (ISL) posted its 12 quarter low margins at 10.7% (down 6.9ppts YoY) due to 1) discounts on local sales, 2) lower margins on exports business and 3) hike in gas prices w.e.f. 2QFY19, we believe. Further, decline in margins were offset to some extent by tax reversal of around Rs280-300mn. As a result, the company recorded earnings of Rs2.09/share (tax adjusted Rs1.4/share), down 23% YoY.
- Net sales of the company went up 18% YoY to Rs13.5bn due to hike in CRC prices. While we estimate volumes to remain flat at around 130-140k tons.
- Finance cost of ISL increased by 157% YoY due to its treatment as expense, while in corresponding period of last year, this amount was being capitalized.
- Distribution expenses were up 30% YoY to Rs134mn amidst increase in transportation cost, we believe.
- Effective tax rate of the company was +4% in 2QFY19 (recorded reversal of around Rs280-300mn) vs. -28% in 2QFY18. We attribute this reversal on account of utilization of remaining rebate on commencement of new line.
- We flag 1) downward revision in duty structure, 2) volatility in commodity prices, 3) dumping from countries not protected by anti-dumping duties, & 4) devaluation beyond our assumptions, as key risks.
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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