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ENGRO_1HCY17 Analyst Briefing Notes

ENGRO held its analyst briefing on Friday (Aug 18'17) to discuss its 1HCY17 earnings performance. To recall, ENGRO announced consolidated/unconsolidated NPAT of PkR3.78bn/PkR4.10bn (EPS: PkR7.21/PkR7.84) in 1HCY17, down 32%YoY/79%YoY. Key highlights of 1HCY17 consolidated result included: 1) weakening topline (down 22%YoY) due to classification of EFOODS as associates (post its partial divestment) despite 23%YoY/17% jump in EFERT/EPCL topline and 2) significantly higher effective tax rate of 64% in 2QCY17 vs. 40% in 2QCY16 on account of retrospective provisioning of ~PkR2.1bn super tax in this period in lieu of CY16. Along with the result, the company announced a second interim cash dividend of PkR7/sh, taking total payout to PkR12/sh. During the briefing, management hailed improved performance during 1HCY17 by its subsidiary EFERT (NPAT: +48%YoY) and EPCL (NPAT: +26.2xYoY) that diluted the impact of lower shareholding (strategic partial divestment) in EFOODS given its disappointing 1HCY17 performance (NPAT: down 91%YoY), on ENGRO's bottom-line. Besides, taking a long term view, ENGRO's management highlighted smooth progress at its flagship Thar coal mining & power project, which is currently 4 months ahead of its schedule and is expected to reach COD by Jun'19. Having lost 7%CYTD, we currently have a Buy stance on the scrip with our SOTP based Jun'18 TP standing at 374.2/sh (upside 26%).                   .

Underlying
Engro

Engro Corporation is an agri based company. Co.'s core business is the manufacturing, purchasing and marketing of chemical fertilizers and seeds. Co. is engaged in the production of Urea fertilizer in Pakistan which is manufactured at Daharki and marketed under brand name Engro. Co. also maintains a seed business and is marketing imported hybrid and open pollinated seeds of maize and sunflower crop under the brand name of Bemisal. Co. has investments in joint ventures engaged in chemical terminal and storage, PVC resin manufacturing and marketing and Automation and Controls businesses.

Provider
AKD Securities Limited
AKD Securities Limited

AKD Securities Ltd. is one of the leading securities firm in Pakistan, providing a comprehensive range of investor focused services, including equity brokerage, economic and securities research, investment banking and financial advisory services. AKD Securities accounts for more than 6% of the average daily value of the Karachi Stock Exchange. AKD Securities was the first brokerage house to launch an online trading platform in Pakistan in November 2002 and now has the largest market share with over 6000 customers. This has helped diversify and expand the retail investor base in the country and ushered in a whole new universe of investors to the stock market.

AKD Securities Ltd. caters to a diversified group of domestic and international institutional investors, high net worth individuals and upscale retail clients, including expatriate Pakistanis. With high quality research, unparalleled execution and distribution capability for both regular and large block trades, AKD Securities Ltd. has earned an outstanding reputation in the Pakistani securities industry.Outside of commercial banks, AKD Securities Ltd. is one of the biggest capital market firms in the country. AKD Securities is the leader in raising and providing risk capital in underwriting, market making and mergers and acquisitions in Pakistan. Good corporate governance and professionalism are emphasized throughout the firm and AKD Securities Ltd. is amongst the very few companies to have introduced a firm-wide comprehensive CODE of ETHICS, overseen by an independent compliance manager.Ultimately, our success is based on the quality of service we provide to our customers and the trust and confidence reposed in us by them. Our focus, therefore, remains on customer satisfaction at all levels in the company.

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Team AKD Research

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