Sitara Peroxide Limited (SPL) announced its FY21 result today, posting below-expected earnings of PKR 35Mn (EPS: PKR 0.6), down 53% YoY. During 4QFY21 alone, the company recorded a loss of PKR 86Mn (LPS: PKR 1.6) as against a profit of PKR 83Mn (EPS: PKR 1.5) and PKR 24Mn (EPS: PKR 0.4) in 4QFY20 and 3QFY21, respectively. Despite better downstream demand for hydrogen peroxide (H202) from the textile sector, lower H202 prices and higher cost pressures kept the earnings in check. Key highlights of the result are discussed below:

During 4QFY21, net revenue slightly increased by 1% YoY to PKR 351Mn due to better demand from the textile sector, however, it declined sequentially by 22% owing to lower hydrogen peroxide prices following the decline in imported hydrogen peroxide prices. This takes the FY21 top-line to PKR 1.9Bn, up 7% YoY.

The company recorded gross margin of –52% in 4QFY21 vs. 40% in 4QFY20 and 21% in 3QFY21. The decline is on account of lower hydrogen peroxide prices and higher RLNG costs.

Finance costs surged by 6% YoY to PKR 19Mn during 4QFY21, however, it declined by 41% YoY to PKR 49Mn during FY21 due to lower interest rate.

On the other hand, other income improved to PKR 100Mn during FY21, up 2.1x YoY.

We have a Buy stance on the scrip with our Jun’22 TP of PKR 31/sh, which implies a total upside of 37% from the last close.

Courtesy – BMA Capital Management Ltd.