Engro Polymer & Chemicals Ltd. (EPCL) reported a significant loss in its recent financial results for 2QCY25, exceeding expectations as margins declined sharply. The company recorded a loss of PkR 2.4 billion (LPS: PkR 2.65) compared to a loss of PkR 688 million (LPS: PkR 0.76) in the same period last year. This greater-than-expected loss was attributed to weaker gross margins and a lower tax reversal than anticipated.

EPCL’s revenue increased to PkR 19.7 billion, reflecting an 11% year-over-year rise. This growth was likely driven by higher sales volumes, which offset the impact of falling PVC prices. However, gross margins fell to 0.2% during the quarter, down from 8.1% in the same period last year. The decline was primarily due to increased gas tariffs and weakened core margins in PVC.

Notably, gas prices for captive power increased to PkR 3,500 per MMBtu effective February 2025, up from PkR 3,000 per MMBtu. Additionally, a levy of PkR 791 per MMBtu was introduced in March 2025. Meanwhile, PVC-ethylene core margins decreased by 17% year-over-year to US$280 per ton due to a drop in international PVC prices amid sluggish demand.

On a positive note, the finance cost fell by 30% year-over-year to PkR 1.5 billion, as lower benchmark interest rates outweighed the effect of higher outstanding borrowings.

We maintain our ‘SELL’ stance on EPCL, as rising energy prices and depressed core margins are likely to continue putting pressure on profitability. Our target price for EPCL as of December 2025 is PkR 30 per share.

Courtesy – AKD Research