Engro Fertilizer Limited 1HCY15 Result Review By IMS Research

Engro Fertilizer Limited posted NPAT of PkR6,855mn (EPS: PkR5.16) in 1HCY15, higher by 103%YoY while in 2QCY15 alone, NPAT stood at PkR3,796mn (EPS: PkR2.85), up by 96%YoY EFERT also announced an interim dividend of PkR1.50/share, the result and payout both being inline with our expectation. However, profit taking has occurred in EFERT post result announcement.

Key 1HCY15 result highlights include: (i) 38.5%YoY higher sales, (ii) 1.2ppt increase in GMs to 36.9% and (iii) effective tax rate of 27% (20% in 2QCY15) despite the super tax. The latter is due to incorporation of a higher tax credit pertaining to anticipated revision of corporate tax rates (to 30%) going forward.

EFERT has rallied 25.6% CYTD on improvement in core fundamentals, underpinned by application of concessionary gas pricing at EnVen (US$0.70/mmbtu) and addition of Eximp’s fertilizer trading business. While 2HCY15 earnings outlook appears buoyant, we flag risks emanating from an opaque gas supply outlook beyond CY15.

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