EFERT—2QCY23 earnings expected to clock in at PkR3.87/sh: We expect EFERT to post a consolidated EPS of PkR3.87/sh against earnings of PkR3.30/sh in 1QCY23 and a loss of PkR0.07/sh in 2QCY22.

Revenues are expected to remain flat QoQ while rising by ~14%YoY, over an increase in urea prices witnessed at the end of 1QCY23 while the quarterly decline in urea offtakes. Furthermore, we expect gross margins to improve to ~35% vs. ~24% in 1QCY23 and ~31% in 2QCY22 due to the above-mentioned increase in urea price, passing on higher gas costs and inflationary pressures. Finance cost is estimated at PkR0.7bn, remaining relatively stable following the company’s policy of reducing debt. However, the record high interest rates keep debt servicing costs on the higher side.

Further, the government has levied a 10% supertax, which is expected to dent earnings as 6% is to be charged retrospectively on FY23 earnings hence, our effective rate comes out at ~50%. We expect a ~PkR3.25/sh dividend payout for the quarter, following a PkR3.5/sh payout in 1QCY23.

Courtesy – AKD Research