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JS Securities Limited – JS Research (October 13, 2022)

Karachi, October 13, 2022 (PPI-OT): EFERT: Base plant closure to dent 4Q income

Engro Fertilizer (EFERT) plant closure during 3QCY22 has taken a toll on its core income, where the company’s 3QCY22 results posted yesterday reflected 3ppt QoQ decline in gross margins and 13% QoQ lower profit before tax. Higher tax base, however, reported sequential improvement in bottom-line, clocking in at Rs3.13/share.

To recall, the Enven plant’s breakdown resulted in production loss of 111k tons, which broadly fell in the 3QCY22. The company has now planned a 60-days BMR on its Base plant, starting from 27th Sep-2022, to improve gas efficiencies. This would keep the plant unavailable for most of 4QCY22, denting prospective income and dividends for CY22.

Management, in its post-results Corporate Briefing session yesterday, shared that the framework for a new fertilizer policy is being discussed with the GoP, aiming to curtail gas circular debt. EFERT is also engaging government to allocate incremental gas flows from Guddu for its Base plant.