Morning Call about – ENGRO, LUCK, PSMC & ACPL – Arif Habib Limited

Karachi, October 28, 2014 (PPI-OT): ENGRO: 3QCY14 EPS expected at PKR 3.35/share, up 86% YoY

Engro Corporation Limited is scheduled to announce its 3QCY14 results on October 29, 2014. The company is estimated to register consolidated net earnings of PKR 1,730mn (EPS: PKR 3.35) up by +86% QoQ compared to PKR 928mn (EPS: PKR 1.79) recorded in the previous quarter, taking 9MCY14 profit after tax to KR 4,893mn (EPS: PKR 9.47), down 14% YoY.

The quarterly jump in the profitability is mainly attributable towards 10% jump in profitability of fertilizer business coupled with some recovery expected in Eximp rice business. On the other hand food business remained depressed and posted loss after tax (LAT) of PKR 77mn in 3QCY14.

Likewise, chemical business remains under pressure as well which posted LAT of PKR 157mn during the period. At current price level of PKR 165/share, the stock of ENGRO offers a massive upside potential of 76% to Arif Habib Limited’s target price objective of PKR 290/share. Based on aforementioned, Arif Habib Limited recommends a strong ‘BUY’.

LUCK: 1QFY15 EPS expected at PKR 8.22/share, +4% up YoY

The board of directors of Lucky Cement Company Ltd (FCCL) is scheduled to meet on 30th Oct’14 to approve its 1QFY15 financial result. Arif Habib Limited expects net earnings to clock in at PKR 8.21/share in 1QFY15 (+4% YoY).

A 10% YoY rise in retention prices coupled with 9% YoY higher dispatches (with mainly 17% YoY growth in local dispatches) is expected to improve gross profit by 20% YoY to PKR 5.05bn (with GP margins to improve by 100 bps YoY to 45.6% in 1QFY15). Arif Habib Limited believes selling/distribution expenses to surge by 48% YoY to PKR 1,026bn on higher export freight charges.

LUCK – Financial Highlights

PKR mn 1QFY15E 1QFY14A YoY 4QFY14A QoQ
Net Sales 10,982 9,332 18% 11,628 -6%
Gross Profit 5,005 4,164 20% 5,000 0%
Gross Margins 45.6% 44.6% 43.0%
Selling Expenses 1,026 696 48% 824 25%
Other Income 244 221 10% 345 -29%
Profit after tax 2,656 2,546 4% 3,159 -16%
Earnings per
share (PKR) 8.21 7.87 9.77

Source: Company Financials, AHL Research

Recommendation

Arif Habib Limited’s based Dec-14 target price for the scrip works out to PKR 460.6/share, with an upside of 10.1% from current levels. Arif Habib Limited recommends ‘Buy’ on the scrip.

PSMC: 3QCY14 EPS expected at PKR 5.44/share, 24% down QoQ

The BOD of Pak Suzuki Motors Company Ltd (PSMC) is scheduled to meet on 29 th Oct’14 to approve its 3QCY14 financial result. Arif Habib Limited’s expectations for earnings are at PKR 5.44/share in 3QCY15 (-24% QoQ), to take 9MCY14’s cumulative earnings to PKR 18.01/share (-3% YoY).

Quarterly earnings decline can be attributed to sluggish car sales in 3QCY14 by an estimated 22%, as variants including Swift (-33% QoQ), Mehran (-24% QoQ), Bolan (-21% QoQ) and Cultus (-17% QoQ) lead the decline.

Arif Habib Limited expects gross margins on QoQ to improve by 42% bhps to 8.55% in 3QCY14 of the impact less of costlier CKD inventories (when PKR appreciated back in Mar’14) procured from a lag of 2 to 3 months.

On YoY basis 9MCY14 earnings are expected to decline by 3% YoY to PKR 18.01/share, owing to one-off gain worth PKR 274.5mn or PKR 3.0/share, realized on the sale of land of its old motor bikes factory in 2QCY13 with its reflection in other operating income as a result.

PSMC – Financial Highlights

PKR mn 3QCY14E 2QCY13A QoQ 9MCY14E 9MCY13A YoY
Net sales 11,360 15,412 -26% 40,467 38,949 4%
Gross profit 972 1,253 -22% 3,195 2,467 30%
Gross Margins 8.6% 8.1% 7.9% 6.3%
Dist. & admin exp. 389 555 -30% 1,337 1,067 25%
Other income 148 150 -1% 444 665 -33%
Profit after tax 447 592 -24% 1,482 1,528 -3%
EPS (PKR) 5.44 7.19 18.01 18.57

Source: Company Financials, AHL Research

Recommendation

Arif Habib Limited’s based Dec-14 target price for the scrip works out to PKR 307/share, offering a upside of 0.3% from current levels.

Arif Habib Limited recommends ‘Hold’ on the scrip, while Arif Habib Limited revisits Arif Habib Limited’s valuation and earnings post clarity on approval of the new Auto Industrial Development Policy (AIDP) by ECC while possible duty reduction on CKD units is on the cards from current ~32.5% to 25%.

ACPL: 1QFY15 EPS expected at PKR 3.90/share, 6% up YoY

The board of directors of Attock Cement Company Ltd (ACPL) is scheduled to meet on 30 th Oct’14 to approve its 1QFY15 financial result. Arif Habib Limited expects net earnings to clock in at PKR 3.90/share in 1QFY15 (+6% YoY).

In Arif Habib Limited’s view, a 10% YoY rise in ex-factory prices coupled with 1% YoY higher dispatches (with substantial +22% YoY growth in export dispatches – contrary to other cement companies) is expected to improve gross profit by 10% YoY to PKR 944mn. Arif Habib Limited also projects the other operating income of the company to increase by 1.02x YoY to PKR 109mn on higher quantum of returns on cash and cash equivalents.
ACPL – Financial Highlights

PKR mn           1QFY15E        1QFY14A        YoY           4QFY14A        QoQ

Net Sales 3,118 2,922 7% 3,334 -6%
Gross Profit 944 855 10% 1,043 -10%
Gross Margins 30.3% 29.2% 31.3%
Selling Expenses 257 228 13% 193 33%
Other Income 109 54 102% 91 20%
Profit after tax 446 423 6% 606 -26%
Earnings
per share (PKR) 3.9 3.69 5.29

Source: Company Financials, AHL Research

Recommendation

Arif Habib Limited’s based Dec-14 target price for the scrip works out to PKR 171/share, offering a downside of 2% from current levels. Arif Habib Limited recommends ‘Hold’ on the scrip.

The post Morning Call about – ENGRO, LUCK, PSMC & ACPL – Arif Habib Limited appeared first on Business News Pakistan.