Engro Polymer & Chemicals Limited (EPCL) held its analyst briefing today to apprise investors on the CY22 result and future outlook. To recall, EPCL posted PAT of PkR11.7bn (EPS: PkR12.4) vs. PAT of PkR15.1bn (EPS: PkR16.3) in CY21, down by 22.5%YoY.

·         Increase in the revenue on year-on-year basis is recorded on the basis of high sales volumes and further optimization in pricing strategy amid declining PVC prices. On the flip side, decline in profits is mainly attributable to lower core delta that has dropped to US$500/ton this year from US$900/ton in last year.

·         In 4QCY23, PVC sales volume clocked in at 67k tons (60k/7k tons of domestic/export). Current PVC price is around PkR10,200/bag. Company has recorded highest ever PVC sales (241k tons) and highest ever production of VCM (218k tons) with 483 days of continuous plant operations.

·         Company has recorded US$21mn of exports and impacted ~US$134mn of import substitution in CY22. Company has focus on imports in future and is open to all markets for the export opportunity.

·         Currently, company has 245k tons of VCM in-house production capacity and 300k tons of PVC capacity. As per management, they continue to plan sales of around 230-240k tons of PVC for the following year.

·         Management informed that company is currently receiving LNG pricing from Dec’22 till Feb’23 and after Feb’23 company will revert to indigenous gas. Furthermore, potential increase in the gas prices will impact their margins.

·         Management stated that company has reversed 6% of the super tax after the Sindh High Court order and only carry provision of 4% in their books.

·         As per management, their Hydrogen peroxide plant is expected to be commissioned in the end of CY23 amid they are currently facing delay’s due to LC disruptions. Company has successfully commissioned its OVR project this year that improves the efficiency and ethylene consumption.

Courtesy – AKD Research