AKD Quotidian about — ICI: 9MFY14 Result Preview

Karachi, April 15, 2014 (PPI-OT): ICI is set to announce its result for 3QFY14 tomorrow. In this regard, AKD Securities expects the company to post sequential growth of 23%QoQ for NPAT of PkR604mn (EPS: PkR6.54) during 3QFY14.

While revenues are likely to remain flat at PkR9,519mn due to a likely sequential slowdown in the Life Sciences business caused by a seasonal slump in seed sales, growth in the bottom-line is likely to be driven by a sharp improvement in the gross margins by 4ppt to 16% with Gross Profit clocking in at PkR1,515mn, up 31%QoQ.

This growth in gross profit is largely due to sharp improvement in the gross margins of the Soda Ash division where the coal boilers became operational during Dec13, as well as a sequential improvement in PSF primary margins due to a sharp fall in feedstock prices. As a result, AKD Securities expects 9MFY14 earnings to clock in at PkR1,438mn (EPS: PkR15.57) as compared to NPAT of PkR1,076mn (EPS: PkR11.65) during 9MFY13.

The 34%YoY growth is due to improved margins as well as lower S and A expenses post the demerger with ICI. Going forward, AKD Securities expects the company to continue with its strong performance led by improvement in the Soda Ash division to post earnings of PkR2,050mn (EPS: PkR22.19) during FY14. In FY15, due to full year operation of coal boiler at the Soda Ash division as well as commissioning of the coal boilers at the PSF plant, AKD Securities expects further growth of 46%YoY in NPAT to PkR3,002mn (EPS: PkR32.51). ICI is currently trading at an FY14F and FY15F P/E of 17.53x and 11.97x.

POL: 9MFY14 Result Preview
Pakistan Oilfields Limited (POL) is scheduled to announce its result for 9MFY14 on Thursday Apr 1714. AKD Securities expects the company to post Net Profit after Tax (NPAT) of PkR10.1bn translating into EPS of PkR42.78 for the aforementioned period, depicting impressive 17% growth on YoY basis. Despite flat international crude oil (Arab light) prices the company’s top line is forecasted to grow by 23%YoY.

This increase in top line is primarily driven by 24%YoY growth in crude oil production and PkR deprecation of 9%YoY. Further support to this impressive top line growth is to be provided by other income which is likely to rise by 7%YoY owing to better payout from subsidiaries (NRL and APL). However, in 9MFY14 AKD Securities expects the company to record 76%YoY higher financing charges which will take away the gloss from an otherwise compressive bottom line. For 3QFY14, AKD Securities forecasts POL to post NPAT of PkR3.2bn (EPS: PkR13.58), representing sequential decline of 3%QoQ.

The company’s top line is likely to record decline of 4%QoQ during 3QFY14, where this decline is mainly attributed to 4%QoQ gain which PkR posted against US$ and 3%QoQ decline in the prices of Arab light. Furthermore, virtually flat hydrocarbon production failed to offset the negativity brought in by PkRs performance against US$ and fall in Arab light prices. Trading at FY14E and FY15F P/E of 9.2x and 8.2x, respectively, the scrip offers upside of 12% to AKD Securities Limited’s Jun14 target price of PkR612/share. The scrip also offers FY14E and FY15F dividend yield of 8.4% and 9.1% respectively.