Engro Polymer & Chemicals Limited (EPCL) announced its 2QCY21 financial result today where the company posted a profit after tax (PAT) of PKR 3,122mn (EPS: PKR 3.44), up by 105x YoY compared to PKR 30mn (EPS: PKR 0.03) during SPLY. On QoQ basis, earnings declined by 25%.

During 1HCY21, the earrings has reached PKR 7,265mn (EPS: PKR 7.99), up by 33x YoY. Along with the result, the company also announced a cash dividend of PKR 7.0/share, taking 1HCY21 payout to PKR 7.80/share.

Result Highlights

· During 2QCY21, net sales witnessed an increase of 155% YoY to settle at PKR 14,825mn, which is mainly attributable to low base of production during 2QCY20, while PVC prices are up 55% YoY. During 1HCY21, sales went up by 137% YoY again due to higher production and higher PVC prices.

· Gross margins of the company went up by 25pps YoY to 35.2%. The rise in gross margins is witnessed due to 115% YoY rise in international PVC margins.

· Other expenses went up by 6x YoY to PKR 588mn during 2QCY21.

· Other income declined by 6% YoY to PKR 306mn due to decline in interest rates.

· Finance costs also declined by 15% YoY to PKR 512mn due to cut in interest rates.

Material Information

· The Board of Directors of the company have decided not to pursue the earlier announcement of Linear Alkyl Benzene Sulphonic Acid (LABSA). To recall, the Board of the company approved to enter in LABSA market back in Nov’19. However, we did not incorporate it in our projections and were waiting for the financial closure of the project.

· We have a “BUY” call on the scrip with a Dec’21 target price of PKR 81.1/share.

Courtesy – AHL Research