Synthetic Product Enterprises plans to increase its production capacity gradually

The management of Synthetic Products Enterprises Limited (SPEL) held a corporate briefing session today to discuss the 1QFY22 financial results and future outlook on the company’s strategy going forward.

Key Highlights

· Synthetic Products Enterprises Limited (SPEL) announced their financial results, posting earnings of PKR 159mn (EPS: PKR 1.71), up by 74% YoY from PKR 88mn (EPS: PKR 0.98).

· Topline of the company increased by 60% YoY to PKR 1,432mn attributable to significant increase in demand of automobile parts, rising demand from FMCG segment and addition of new customers.

· Management expects demand of automobile parts to remain robust given double digit growth in auto sales volumes along while the company is also in discussion with new automobile players for sale or purchase of automobile parts.

· The company is enlarging its footprints and exploring new markets. Its new plant in Karachi has commenced commercial production from 7th Jun’21. As of now, company has invested PKR 600mn on this plant and plans to increase its production capacity gradually.

· Company holds 35-40% markets share in 19-liter bottle category and further expects its share to increase as the market size is growing at 10% per annum.

· Management expects revenue to grow by 20-25% per annum due to massive increase in demand and expansion in Karachi which will play a key role in increasing revenue of the company. On the gross margin front, management expects gross margins to grow due to volumetric growth and better inventory management.

· Despite change in consumer financing rules and regulations, management believes sales of automobiles will continue to witness double digit growth which will be beneficial for their company as auto parts sales contributes 40-45% of total revenue.

· Demand from FMCG and food segment is rising phenomenally due to economic growth together with addition of new customers which will increase the capacity utilization.

· Currently, company is also focusing on exports market which will not only hedge company against dollar appreciation but will also help to claim tax incentives. However, company does not have enough capacity to meet export demand as local demand is increasing drastically.

Courtesy – AHL Research

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