Please refer to the last page for Analyst Certification and
other important disclosures.
CY14 results to remain subdued
ENGRO is scheduled to announce its CY14 financial results on
February 17, 2014. The company is
expected to post EPS of PKR13.00 (at current number of shares),
down 17% YoY. 4QCY14 EPS
shall clock in at PKR4.52, up 4% YoY and 35% QoQ. We expect the
company to announce cash
payout of PKR2/sh along with the results, taking full year
payout to PKR4/sh. Despite robust
results by EFERT (49% YoY), CY14 earnings for ENGRO shall remain
subdued primarily on
account of poor performance within the rice segment. Eximp is
estimated to contribute loss of
PKR3.3bn to ENGRO in CY14, relative to profit of PKR59mn in
CY13, primarily owing to huge
losses in the rice business post decline in international prices
for the commodity. The polymer
business also added to ENGROs woes during CY14 as unfavorable
vinyl chain prices caused EPCL
to post loss of PKR1.02bn. Furthermore, lower margins on the
dairy business and impairment
charges on Canadian operations kept EFOODs profitability in
check.
Financial Highlights No of Shares 524mn
(PKR Mn) 4QCY13A 4QCY14E YoY CY13A CY14E YoY
Net sales 47,596 48,450 2% 155,360 170,847 10%
Cost of sales 35,802 38,917 9% 114,763 134,954 18%
Gross profit 11,793 9,533 -19% 40,597 35,893 -12%
Operating Exp. - Net 4,817 3,215 -33% 14,842 13,557 -9%
Share of profit of JV 164 160 -3% 610 683 12%
Finance cost 2,679 3,211 20% 13,101 11,661 -11%
PBT 4,462 3,266 -27% 13,263 11,358 -14%
Taxation 2,180 719 -67% 4,573 3,648 -20%
PAT before MI 2,282 2,547 12% 8,690 7,710 -11%
Minority Interest 15 180 1071% 507 901 78%
PAT 2,267 2,367 4% 8,183 6,809 -17%
EPS (PKR) 4.33 4.52 4% 15.62 13.00 -17%
DPS (PKR) 0.00 2.00 NM 0.00 3.97 NM
Source: Elixir Research, Company Accounts
Turnaround likely in CY15
The company is expected to post a strong turnaround in CY15 on
the back of improved outlook
for the fertilizer and dairy segments coupled with lower losses
from the rice and polymers
business. EFERT and EFOODS are expected to post earnings growth
of 62% and 1.7x YoY during
the year as the former is likely to start receiving
concessionary gas while the latter is anticipated
to display sharp margin expansion. ENGRO is expected to scale
down, if not discontinue, the rice
business due to consistent losses since inception. In addition
to this, initiation of LNG business
shall also add PKR1.96/sh to earnings for ENGRO in CY15.
Among our top picks in the fertilizer space
ENGRO is among our top picks in the fertilizer space. The
company is trading at a CY15 PER of
8.6x and a discount of 26% to the stake adjusted market value of
its listed subsidiaries. Our
SOTP-based Dec-15 PT of PKR332 for the stock offers total return
of 21% at last closing. We
maintain BUY!
Chemicals Market weight
ENGRO PA Price Target: PKR332/Share
Closing Price: PKR280.6/Share
BUY
Stock Statistics
12m Price Range (PKR) 299.9 156.8
Market Cap (PKR mn)
146,968.7
Outstanding Shares (mn) 523.8
Avg. Daily Volume mn (6m) 4.4
1Yr Relative Performance
Source: Elixir Research
ENGRO CY14E CY15E CY16E
EPS (PKR) 13.0 32.7 32.6
DPS (PKR) 4.0 8.0 16.5
PER 21.6 8.6 8.6
Div Yield 1% 3% 6%
EV/EBITDA (x) 7.3 4.2 4.1
P/BV (x) 2.3 1.8 1.6
ROE 11% 24% 20%
Source: Elixir Research
Syed Nasir RizviAC
[email protected] (+92-21) 3569 4717
Result Preview 16 February, 2015 Pakistan Research
ENGRO: Earnings to decline 17% YoY in CY14
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(%) ENGRO KSE-100 INDEX
2
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report, certifies that (1) the views expressed in this report
accurately reflect his/her personal views about all of the subject
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