Engro Polymer & Chemicals Limited – Dec’22 target price of PKR 77.5/share

Engro Polymer & Chemicals Limited (EPCL) announced its 4QCY21 financial result today where the company posted a profit after tax (PAT) of PKR 4,689mn (EPS: PKR 5.16), up by 29% YoY compared to PKR 3,627mn (EPS: PKR 3.99) during SPLY. On a QoQ basis, earnings increased by 51%. During CY21, bottom-line arrived at PKR 15,061mn (EPS: PKR 16.57), up by 163% YoY. Along with the result, the company also announced a cash dividend of PKR 5.50/share, taking CY21 payout to PKR 16.30/share.

Result Highlights

During 4QCY21 net sales witnessed an increase of 67% YoY to settle at PKR 20,699mn, mainly attributable to higher volumetric sales along with higher PVC prices (+46% YoY). During CY21, revenue went up by 98% YoY due to aforementioned reasons.

Gross margins of the company went down by 12pps YoY to 35.5% during 4QCY21. The decline in gross margins was witnessed due to lower price premium, we view. However, PVC margins had undergone an increase of 58% YoY.

Other expenses went up by 654% YoY to PKR 882mn during 4QCY21 attributable to exchange losses and higher WPPF and WWF due to higher profitability, we view.

Other income also increased by 82% YoY to PKR 356mn led by higher level of investments.

Finance costs have increased by 35% YoY to PKR 502mn due to augmented borrowings along with higher interest rates.

Recommendation

· We have a “BUY” call on the scrip with a Dec’22 target price of PKR 77.5/share.

Courtesy- AHL Research

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