Engro Holdings Ltd. (ENGROH) announced its 1QCY25 results, reporting consolidated earnings of PkR1.8bn (EPS: PkR1.47) compared to PkR4.0bn (EPS: PkR3.34) in SPLY, down 56%YoY. The said decline is primarily attributed to the sluggish performance of the fertilizer business. However, earnings were below our expectations due to higher-than-expected taxation; additionally, the company skipped dividend payout, contrary to our expectation of PKR 3.0/share.

• The fertiliser business (EFERT) reported a 63% year-over-year (Yoy) decline in earnings to PKR 2.9 billion in 1qcy25, primarily attributed to a 58% and 71% Yoy drop in offtakes and a 6.8 times year-over-year surge in finance cost. However, gross margins improved by 12 points year-over-year (Yoy), as 1qcy24 margins were dampened by the impact of high-cost imported urea lifted from the government.
• EPCL’s loss declined by 9%YoY in 1QCY25 to PkR825mn, mainly due to improved gross margins and lower finance costs. Where gross margins improved due to higher offtakes and improved caustic prices. At the same time, finance cost declined by 10%YoY, as lower benchmark interest rates offset the impact of higher outstanding borrowings.
• FCEPL contributed PkR433mn to profitability during the quarter, compared to PkR265mn in the same period last year, driven by improved gross margins resulting from higher prices and lower finance costs following a decline in the KIBOR rate.
• We expect the company to reclassify the energy business (Engro Energy) from ‘held for sale’ back to continuous profits from the next quarter amid the termination of thermal assets sales. We expect profitability of Engro Energy Ltd. at PkR5.0bn (PkR4.19/sh) during the quarter, without adjustment in carrying value.
• We maintain our ‘BUY’ stance on ENGROH with Dec’25 TP of PkR301/sh. The anticipated improvement in fertilizer business, coupled with expansion in the telecom tower segment and declining interest rates, is expected to enhance prospects.

Courtesy –  AKD Research