SEARL has reported 1QFY25 attributable NPAT (both continuing and discontinued ops) of PKR408mn (EPS: PKR0.80), up 3.3x YoY and much higher than our estimated EPS of PKR0.2/sh. Attributable profits from continuing ops have reached PKR287.5mn (EPS: PKR0.58). This is a sharp improvement over the previous quarters’ losses. Gross margins have jumped to 45.4% vs. 44.9% SPLY (excluding SPL business) following the carving out of SPL (38% GMs SPLY when we include SPL business).

Key highlights for 1QFY25 results:

§  SEARL has reported net revenues of PKR7.6bn (down 12% YoY), in line with our estimates. The decline is due to the carving out of SPL business, which contributed roughly PKR2.1bn/quarter in sales to SEARL’s consolidated financials.

§  SEARL’s margins have come in at 45% vs. our estimated 38%. This reflects the strength of SEARL’s existing portfolio. Periodic price hikes and focus on legacy brands should build these up further. Importantly, pre-acquisition of SPL, SEARL’s GMs used to average 45-50% (FY10-20).

§  Distribution expenses are PKR1.8bn, down 8% YoY, while finance costs declined 26% YoY to PKR755mn – both align with estimates. The sale of SPL should help deleverage SEARL’s balance sheet.

This is a strong earnings base, and we expect the full impact of recent price hikes to be reflected in 2QFY25. We reiterate our liking for SEARL and will revise our estimates following the release of detailed financials.

Courtesy – IMS Research