The Searle Company (SEARL): 1QFY19 EPS Rs3.2, -15% YoY (+91 % QoQ); (Better than expectations)
- SEARL announced consolidated earnings of Rs676mn (diluted EPS Rs3.2) down 15% YoY in 1QFY19, which fared better than our estimates, mainly due to better than anticipated margins.
- Net sales witnessed 10% YoY growth, mainly on the back of volumetric growth we believe.
- Gross margin decline was restricted to 90bps YoY to 48% in 1QFY19. This was contrary to our expectations as we were anticipating significant contraction in margins due to PKR weakness against the greenback. Gross margins were also better on sequential basis as 4QFY18 margins stood at 42%. We await management clarity in this regard.
- Distribution expenses as a percentage of sales crawled up 2ppts YoY during the outgoing quarter. We attribute this to higher travelling expenses amidst increasing fuel cost.
- While pretax earnings were down 13% YoY in 1QFY19, net earnings fell 15% on the back of higher effective tax rate, up 193bps to 16%.
- We flag 1) lower than expected volumetric growth, 2) regulatory and legal issues restricting price increase, 3) delay in introducing new products and 4) higher than anticipated distribution expenses as key risks for SEARL.
The Searle Company Limited is a holding company, which is principally engaged in the manufacture of pharmaceutical products and other consumer products. In addition, the Company is engaged in sale of food and consumer products, and manufacture of pharmaceutical products for other companies. The Company operates through three segments: Pharma, Consumer and Investment property. The Company's geographical segments include Pakistan, South Asia, East Africa, South-East Asia and Middle East. The Company's portfolio includes three divisions: Pharma, Consumer Health and Nutrition. Its products include Selanz SR, Levoxin, Lomotil, Xaroban, Vitrum, Rhulef, Canderel, Peditral, Ezium, Hydryllin, Xadine, Zenbar, Extor, Adronil, Nuberol/Nuberol Forte and Byscard. The Company has pharmaceutical range across therapeutic areas, such as cardiovascular, respiratory care, gastroenterology, pain management, orthocare, neuropsychiatry, probiotics, antibiotics and nutritional care.
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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