AKD Quotidian about — OGDC: 1QFY13 Result Preview

Karachi, October 23, 2012 (PPI-OT): OGDC is scheduled to announce its 1QFY13 result later today where AKD Securities expects the company to announce NPAT of PKR 25.4 billion versus NPAT of PKR 21.92 billion in the same period last year.

According to AKD Securities, the result translates into an EPS of PKR 5.91 against EPS of PKR 5.1 in the corresponding period last year, translating into a growth of 15.8%YoY. Bottomline growth underscores topline expansion in a blend of higher volumes and development returns (higher realized prices and PKR depreciation). AKD Securities expects oil volumes to increase by 6%YoY while gas production volumes should jump by I 5%YoY leading topline growth of 22%YoY to PKR 54.6 billion. Operating expenses are forecasted to increase by 27%YoY while exploration and prospecting expenditure should include a write off of Moolan North – 1 and higher 2D and 3D seismic acquisitions. Non-operating income should increase by 16%YoY ted by exchange gains and interest income. Alongside the result, OGDC should announce an interim DPS of PKR 1.5 to PKR 2/share. At current market price, AKD Securities recommends an Accumulate stance on the stock with a target price of PKR 206, offering an upside of 16%.

NCL: 1QFY13 Result Preview

Nishat (Chunian) Limited (NCL) is scheduled to announce its 1QFY13 result on Oct 25’12 where AKD Securities expects NPAT of PKR 391 million (EPS: PKR 2.15), largely a replica of 4QFY12 NPAT of PKR 400 million (EPS: PKR 2.20) but a remarkable improvement from NLAT of PKR 86 million (LPS: PKR 0.47) in 1QFY12. AKD Securities expects the sector-wide string of positives, for the spinning segment in particular, to continue through FY13 where rising labor costs coupled with higher cotton prices in China is driving demand of cotton yarn. As per data released by Pakistan Bureau of Statistics (PBS), cotton yarn exports from Pakistan surged by a stellar 29%MoM in Sep’12 (+7%QoQ) while the PKR has depreciated by 2.7%QoQ against the greenback. In the absence of any significant change in natural gas supply, AKD Securities expects gross margins for NCL to remain firm.

(PKR million) 1QFY13 4QFY12 QoQ 1QFY12 YoY
Net sales

5,501

5,367

2%

4,135

33%

Gross Profit

835

799

5%

360

132%

S and A

169

171

-1%

145

17%

Operating profit

666

628

6%

216

208%

Other income

125

163

-23%

59

113%

NPBT

446

429

4%

(45)

nm

NPAT

391

400

-2%

(86)

nm

EPS (PKR)

2.15

220

(0.47)

Source: Company Reports and AKD Research

Although the scrip has gained 45%FY13TD, it still offers a significant upside of 21% to AKD Securities’ Jun’13 TP of PKR 30/share where AKD Securities believes that current valuations (NCL is trading at a FY13F P/E of 35x and dividend yield of 8.9%) have yet to fully incorporate sector-wide positives i.e. i) surge in cotton yarn demand from China, ii) cut in EFF and LTFF rates, iii) priority in gas supply and iv) approval of ATP by the EU and likely nomination for GSP plus status. Buy!