Tariq Glass Industries profits increases to PKR2.63bn in 1HFY22

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TGL has posted 2QFY22 NPAT of PKR1.47bn (EPS: PKR10.7), up 27% qoq and 146% yoy, against expert’s expectation of PKR0.96bn (EPS: PKR6.98). Earnings beat is led by higher-than-expected sales and margins, which are likely due to a combination of higher realized prices and inventory gains. The result takes 1H net profits to PKR2.63bn (EPS: PKR19.09), up 163% yoy.

Key takeaways from 2QFY22 result include:

Net Sales of PKR8.0bn are highest ever for TGL, up 21% qoq and 64% yoy, amid favorable demand prospects. Note that sales have risen substantially even though one Tableware furnace was offline for about a month, as TGL had inventory from the previous quarters. We also suspect TGL operated the recently commissioned Float Glass Unit-II at higher utilization levels. TGL had increased prices of float glasses which also contributed to higher revenues.

Gross Margins have improved by 2.1ppt qoq to 30% from 28.1% in 1QFY22. The improvement is a result of costs effectively passed on to customers, along with higher sales of lower cost inventory from the previous quarters. The quarterly margins are highest ever since FY14 notwithstanding rising energy prices.

Admin and Distribution expenses of c.PKR185mn, have risen by 17% qoq in tandem with sales. Note that TGL has also been increasing exports, which could have contributed to greater selling expenses, in our view.

Finance costs of PKR76mn are down 22% qoq, indicating further deleveraging, in our view. We await detailed accounts for clarity on this matter.

Effective tax rate clocked in at 28% for the quarter against 25% in 1QFY22.

TGL has posted higher margins and profits during the quarter, which however, are likely to moderate amid rising energy and other variable costs, in our view. Strong earnings are evident that TGL will continue to post sustainable earnings going forward, which maintains our liking on the scrip. We have a June’22 Target Price of PKR166/sh.

Courtesy-  Intermarket Securities Limited.

 

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