Tariq Glass Ltd (TGL) has posted net profit of PKR295mn (EPS: PKR2.14) in 4QFY22, down c.38% YoY and 76% QoQ. This took net profits in FY22 to PKR4.1bn (EPS: PKR30.06), almost double from last year. The result is lower than our EPS estimate, due to shrinking inventory gains and drastically higher RLNG cost, resulting in lower-than-expected gross margin of 16%. The result is accompanied with a final cash dividend of PKR2/sh and a bonus of 25%, lower than our estimated DPS of PKR13.

 Key result expectations for 4QFY22:

TGL posted revenue of PKR8.0bn relatively in line with our expectation of c. PKR7.6bn, up 20% QoQ and 58% YoY, on account of higher prices amid rise in fuel costs and PKR devaluation.

Gross margin fell drastically to 15.6ppt QoQ (albeit down 2.4ppt YoY) to c.16%, amid rising fuel costs (RLNG prices rose 40% QoQ) and PKR devaluation of c.10% during 4Q. The decline in margin is also because of normalizing GM, which had reached all-time high levels of 32% in 3QFY22, owing to inventory gains.

Administration and distribution expenses clocked in at PKR103mn and PKR97mn, up c.23% YoY. Finance cost registered in at PKR93mn (PKR81mn in 3QFY22), up 14% QoQ and 67% YoY, on account of rising interest rates.

Effective tax rate for the quarter clocked in at c.70%, higher than our expectation of 52% due to one-off super tax of 4% to be added to the full year’s PBT.

TGL has posted a weak result with gross margins declining substantially due to elevated RLNG cost and diminishing inventory gains. On the flip side, the company has only paid out PKR2/sh and announced a 25% bonus, whereas, we assumed final dividend of PKR13.0/sh. We await the annual accounts for further clarity and are currently in the process of revising our TP. Historically the company has demonstrated its ability to maintain strong margins, but the sharp miss this quarter led has led to the share hitting lower lock.

Courtesy – IMS Research