Engro Fertilizer Limited (EFERT) is expected to announce the financial result for 1HCY24 soon, where we expect the company to post a profit after tax of PKR 16,312 (EPS: PKR 12.22), witnessing a massive jump of 3x YoY on account of i) surge in urea and DAP prices and ii) absence of imposition of further super tax during the period.

On a quarterly basis, profitability is expected to reach PKR 5,528mn (EPS: PKR 4.14), depicting a surge of 5x YoY amid the imposition of an additional 6% super tax on profit before tax in CY22 and 1HCY23 coupled with a deferred tax adjustment in 2QCY23.

Net sales are expected to increase 3% YoY to PKR 39,714mn during 2QCY24 amid i) 59% and 15% YoY higher urea and DAP prices, respectively, and ii) 17% YoY growth in DAP sales.

Meanwhile, urea offtake contracted 36% YoY due to 58 days of maintenance at the EnVen plant. Due to higher urea prices, gross margins are expected to settle at 34.08% during 2QCY24 vis-à-vis 29.77% in SPLY. Furthermore, given the fall in short-term borrowings, financial charges are projected to decline by 50% YoY to PKR 354mn.

Other income is anticipated to swell up by 2x YoY to PKR 1,035mn due to higher income from cash and cash balances. We expect EFERT to announce a cash dividend of PKR 4.00/share (PKR 12.00 in 1HCY24).

Courtesy – AHL Research