FLASHNEWS:

AKD Securities Limited – Off the Analyst’s Desk (October 18, 2021)

Karachi, October 18, 2021 (PPI-OT): EPCL: announced 3QCY21 EPS of PkR 3.43 – In line with expectation

Engro Polymer and Chemicals Ltd (EPCL) announced 3QCY21 NPAT of PkR3.12bn (EPS: PkR3.43), up 65.9%YoY and flat QoQ, taking 9MCY21 NPAT to PkR10.4bn (EPS: PkR11.45) vs. PkR2.05bn (EPS: PkR2.25) in 9MCY20.

The result was in line with our expectation, the company however, surprised with an interim cash dividend of PkR3.0/sh, taking 9MCY21 payout to PkR11.80/sh, translating into +100% payout vs. 5yr historical payout ratio of 30%.

Earnings increased by 66%YoY and remained flat QoQ in 3QCY21: Earnings was led by (i) increase in revenues by 27/87.2%QoQ/YoY, however, gross margins clocked in at 28% in 3QCY21 vs. 35% in the previous quarter, due to 14%QoQ decrease in PVC ethylene margins (US$852/MT), (ii) other income increased by 23/54.7%QoQ/YoY, and (iii) 5%QoQ decrease in finance cost.

We look forward to the management call before updating our earnings and payout estimates for EPCL. The stock currently trades at CY21/22F P/E of 3.5/6.6x. Our TP of PkR74/sh implies an upside of 27.6% from last close – Buy!