Morning Call about PTC 9MFY12 and ENGRO 1QCY12 – Arif Habib Limited

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Karachi: PTC: Earnings to drop by 13% YoY in 9MFY12

Pakistan Telecommunication Company is scheduled to announce its 9MFY12 results on April 25, 2012.

According to Arif Habib Limited, on a standalone basis, Arif Habib Limited expects the company to post an earnings of PKR 4,343mn (EPS: PKR 0.85) in 9MFY12 as compared to PKR 4,972mn (EPS: PKR 0.97) in same period last year, depicting a decline of 13% YoY. This is primarily due to a decreased level of other operating income and increasing human resource cost. The company’s other income is estimated to decline by 39% YoY to PKR 2,576mn compared to PKR 4,190mn in the corresponding period last year. PTC’s gross margins are expected to further shrink to 25.8% in 9MFY12 from 27.5% in 9MFY11 as costs continue to increase at a higher pace. Considering the historical payout trends by the company and the Government fiscal situation, one cannot rule out the possibility of dividend payout by the company. Arif Habib Limited expects that company will pay a dividend of PKR 1.5 per share in 3QFY12.

Financial Highlights (PKR million)	3QFY12	2QFY12	%Chg.	9MFY12	9MFY11	%Chg.
Revenue	15,154	14,857	2%	44,494	41,024	8%
Cost of Services	11,024	10,830	2%	32,706	30,560	7%
Gross Profit	4,129	4,027	3%	11,787	10,464	13%
Admin and General Expenses	1,925	1,880	2%	5,624	5,136	9%
Selling and Marketing Expenses	682	612	11%	1,863	1,705	9%
Other Income	850	747	14%	2,576	4,190	-39%
Operating Profit	2,373	2,282	4%	6,876	7,813	-12%
Finance Cost	69	67	3%	202	173	17%
Profit before Tax	2,304	2,215	4%	6,674	7,640	-13%
Taxation	804	774	4%	2,330	2,668	-13%
Profit after Tax	1,499	1,442	4%	4,343	4,972	-13%
EPS (PKR)	0.29	0.28	4%	0.85	0.97	-13%
Source: Company Financials and AHL Research

 

ENGRO: Profits to head south after Fertilizer losses

The Board of Directors of Engro Corporation Limited (ENGRO) is scheduled to meet on April 27, 2012 to approve the financial results for 1QCY12. Arif Habib Limited expects the company to earn profit after tax (PAT) of PKR 55mn (EPS: PKR 0.11) in 1QCY12, representing a 97% YoY decline from 1QCY11’s PAT of PKR 2,072mn (EPS: PKR 4.05). This downturn in the Company’s fortunes can primarily be attributed to ENGRO’s 100% owned subsidiary Engro Fertilizer (EFert), which posted a net loss of PKR 1.4bn (Per share impact on ENGRO: PKR 2.78), as compared to a net profit of PKR 1.4bn (Per share impact on ENGRO: PKR 2.73). As per Arif Habib Limited’s estimates, the subsidiary managed to sell a paltry 79 kTons of urea during the period under review, compared to 242 kTons in the corresponding period last year. A combination of decline in production due to gas curtailment and dealers’ preference for subsidized imported urea is the main reason for this decline in offtake. EFert’s finance cost increased 5x YoY to PKR 2.7bn in 1QCY12, while it has also deferred its tax to the tune of PKR 801mn during the period under review. The Corporation’s other major businesses however, have continued on their growth trajectory, with Engro Polymer and Chemicals Limited (EPCL) and Engro Foods Limited (EFOODS) registering profitability growth of 802% YoY and 315% YoY to PKR 414mn and PKR 486mn respectively. Arif Habib Limited estimates Engro Powergen Limited and Engro Vopak Limited to register profitability growths of 50% YoY and 53% YoY to PKR 519mn and PKR 366mn respectively. Engro Eximp on the other hand, is expected to post a net profit of PKR 130mn, depicting a decline of 21% YoY.

Profitability Breakdown (PKRmn)	1QCY12	1QCY11	YoY
Fertilizer	(1,420)	1,397	-202%
Eximp	130	164	-21%
Polymer	232	(33)	802%
Food	437	105	315%
Power	493	328	50%
Vopak	183	120	53%
Avanceon	–	(9)
Consolidated earnings	55	2,072	-97%
Source: Company Accounts and AHL research		0.11	4.05