FLASHNEWS:

AKD Securities Limited – Off the Analyst’s Desk (October 25, 2021)

Karachi, October 25, 2021 (PPI-OT): FFBL and INDU: Result Previews

FFBL earnings to rise by 110%YoY in 3QCY21: Fauji Fertilizer Bin Qasim Limited (FFBL) is expected to post 3QCY21 unconsolidated NPAT of PkR6.95bn (EPS: PkR5.39) as opposed to NPAT of PkR3.3bn (EPS: PkR2.56) in the same period last year (+110%YoY) and NPAT of PkR2.6bn (EPS: PkR2.02) in the previous quarter (+167%QoQ), taking the 9MCY21 NPAT to PkR10.8bn (EPS: PkR8.39) as opposed to a loss of PkR901mn in 9MCY20 (LPS: PkR0.7). The growth in earnings is attributed to higher expected offtake in i) Urea (+17%QoQ/35%YoY), and ii) DAP (+145%QoQ). In addition to this, the company has successfully completed the sale transaction of Foundation Wind Energy Limited I and II (FWEL I and II) resulting in one-off gain of PkR2.3/sh. Similarly, we expect the gross margin to hover around ~20% in 3QCY21 (vs 15.7% in 3QCY21) on account of higher DAP margins in contrast to same period last year (DAP margin: US$122/MT in 3QCY21 vs US$31/MT in 3QCY20). We reiterate our BUY stance on FFBL (TP: PkR37/sh), implying an upside of 60% from the last close.

INDU to post 1QFY22 EPS of PkR58.6: We expect Indus Motor Company Limited (INDU) to post 1QFY22 NPAT of PkR4.5bn (EPS: PkR58.6), a whopping increase of 149%YoY and 4.4%QoQ basis. We expect the topline to swell by 87%YoY on account of 59%YoY higher offtake in volumes compared to same period last year. In comparison to the previous quarter, we expect the topline to inflate by 33%QoQ on account of 28%QoQ growth in volumes, led by Hilux (+79%QoQ), Fortuner (+46%QoQ), Corolla (+29%QoQ) and Yaris (+10%QoQ). On cumulative basis, total volume offtake for INDU in 1QFY22 stands at 18,646 units, registering all time high volumes in a quarter. In addition to this, the company has a gigantic reserve of PkR82bn in short term investments, providing a cushion to earnings in form of other income (PkR16.8/sh after tax). Lastly, we expect INDU to maintain the payout ratio of 65%, resulting in a dividend of PkR38/sh in 1QFY22. We maintain our Buy stance on INDU with a target price of PkR1,587/sh, implying an upside of 42% in addition to DY of 11%.