ENGRO to finalize petrochemical plant study by Dec’22

Engro Corporation Limited (ENGRO) held its corporate briefing session today to discuss its CY21 annual result and future outlook of the company. To recall, the company posted unconsolidated NPAT of PkR18.5bn (EPS: PkR32.1), depicting a growth of 14%YoY. On consolidated basis, the NPAT grew by 19%YoY to PkR52.6bn (EPS: PkR48.5). The company also announced final cash dividend of PkR1.0/sh, taking the cumulative CY21 payout to PkR25.0/sh.

The consolidated revenue clocked in at PkR312bn, growing 25%YoY on the back of i) highest ever sales of urea (2.3mn MT) by EFERT, resulting in a market of share of 36% (vs 34% in CY20), ii) highest ever sales by EPCL (207k MT) which recorded PVC market share of 95% (vs 65% in CY20), iii) 18%YoY growth in revenue of FCEPL through leveraging new channels, improving reach, route to markets and increased investment across the brands.

In addition to this, Engro Enfrashare deployed 79% of total new B2S sites built which led to an increase of 3xYoY in revenue. As of CY21 the company has 2,246 operational sites (+178%YoY) and 2,481 tenants, achieving a tenancy ratio of 1.1x. In the power division, EPTL achieved 83% availability with 80% load factor, dispatching 4,225GWh. Similarly, EPQL’s revenue increased by 26%YoY on account of higher dispatch and load factor, being offset by the absence of long term debt  servicing component. In the terminal business, Engro Elengy handled 72 vessels while Engro Vopak handled 1.28mn MT (+12%YoY) of chemicals.

The group is currently focusing on upcoming project – few of them in the execution phase while some of them are still under the planning stage. Engro Enfrashare expects addition of 1,000 new towers each year with a target to reach 5,000 towers. The Petrochemical project (PDH/PP) for which EOIs have been received from potential EPC contractors. The project is currently in FEED mode for which the final investment decision will be taken by Dec’22. Once the green light is received, the facility is expected to come online by CY26.

For Hybrid Renewable Energy Park, Engro Energy has signed the MoU with STDC. The phase I of project will be the development of 400MW (240MW wind and 160MW solar) which will be scaled up to 1GW. The project is expected to increase share of renewable energy to 30% by CY30 and create import substitution of ~PkR13bn annually. For Thar coal mine, phase II and III expansion projects are expected to increase the mining capacity to 12.2mn MT (Phase I capacity of 3.8mn MT).

We maintain our Buy stance on ENGRO with Dec’22 target price of PkR346/sh, implying an upside of 25% from last close. The stock is currently trading at a P/E of 5.5x.

Courtesy- AKD Research

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