The Searle Company (SEARL): 3QFY19 EPS Rs2.23, down 25% YoY (-24% QoQ) (Better than expectations)
- SEARL announced consolidated earnings of Rs473mn with EPS of Rs2.2 down 25% YoY in 3QFY19, which is slightly above our expectations, mainly due to lower admin cost, down 35% YoY.
- Net Sales witnessed 13% YoY growth on the back of recent price hike allowed to pharmaceuticals by Drug Regulatory Authority of Pakistan (DRAP).
- Gross margin declined by 4ppts YoY to 47% as a result of higher production cost which was expected due to rising inflationary environment & significant devaluation of PKR against greenback .
- Selling expenses recorded in 3QFY19 is higher by 31% YoY due to rising costs.
- Borrowing cost has also increased by 1.12x mainly as a result of higher interest rates, +475bps to 10.75% from Jan 2018 to date.
- While pretax earnings were down 16% YoY in 3QFY19, net earnings fell 25% on the back of higher effective tax rate, up by 9ppts to 23%.
- We flag 1) regulatory and legal issues restricting price increase, 2) uncertainty due to Government policies 3) delay in introduction of new products 4) higher cost of production due to higher inflation & devaluation of currency 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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