Azee Securities (Pvt) Ltd.
Engro Corporation Limited (ENGRO) announced its nine months result ended September 2015 where it enclosed consolidated profit after tax of Rs 11.02 billion (EPS: Rs 16.95/share) with a gigantic growth of 113% YoY as compared to Rs 5.2 billion (EPS: Rs 8.53/share) it reported for 9MCY14. Massive rise in profitability mainly driven by better earnings from Fertilizer and Foods businesses along with positive contribution form newly commencement of LNG terminal.
Engro Foods revenue for the period was Rs 37.7 billion versus Rs 30.7 billion in the same period last year, while the overall PAT was Rs 2,601 million versus Rs 252 million in the same period last year, largely due to higher volumes and cheaper milk procurement, fuel and energy costs.
Engro Fertilizer declared revenues of Rs 52.3 billion as compared to Rs 43.7 billion last year. Despite lower Urea sales volumes, purchase of trading business increased revenues. The net PAT for the period stood at Ra 9.6 billion as compared to Rs 5.5 billion same period last year, on account of implementation of concessionary pricing effective from March 16, 2015, lower finance cost as a result of IFC loan conversion, early loan repayments, lower KIBOR and better cash flows.
Engro Polymer posted revenues of Rs 17.1 billion in 9MCY15, the same as last year’s, along with a loss-after-tax of Rs 813 million versus Rs 33 million loss for the same period last year primarily due to lower international PVC-Ethylene core delta, higher energy prices, duty impact on raw material and high cost raw material inventory carried over from last year as well as foreign exchanges losses incurred on USD based liabilities due to Rupee devaluation during the period.
Engro Eximp Agri products (EEAP) business achieved a total husking of 14,310 KT of paddy and processed 7,605 KT of rice. 7,257 KT of rice was exported as compared to 31,987 KT in 9MCY14. Processing and sales volumes were lower due to the new rice business strategy of minimizing open positions on paddy. Impairment loss amounting to Rs 2.1 billion was booked against its investment in the rice processing unit.
Engro Powergen Qadirpur completed its turnaround activity utilizing 33 days of scheduled outage in April/May. Further, there was an 8 day outage in July/August of annual turnaround of Qadirpur gas processing facility. EPQL earned a PAT of Rs 1.4 billion in 9MCY15 versus Rs 1.5 billion in the same period last year.
Engro Elengy terminal has handled 6 cargo shipments by Floating Storage & Regasification Unit (FSRU) shuttling to Qatar and 5 Ship-to-Ship (STS) operations, taking the total tally to 11 cargoes during nine months period. In the same period 631,006 MT of LNG was handled.
EngroVopak handled 74 KT of LPG due to SSGC’s terminal closure to cater operational issues. Further, services provided for the import of LNG into the country also increased the company’s profitability.
The stock is currently trading at Rs 274.01 /share, imitating an upside potential of 32%against our June’16 target price of Rs 363/share.