· ICI Pakistan Limited (ICI) announced its 1QFY23 financial result today where the company posted a profit after tax (PAT) of PKR 1,800mn (EPS: PKR 19.49), down by 50% YoY compared to PKR 3,602mn (EPS: PKR 39.00) during SPLY. The decline in earnings was due to absence of a gain on re-measurement of existing interest in NutriCo Pakistan (PKR 1,847mn during 1QFY22), higher taxation, and higher finance cost. On a QoQ basis, earnings went up by 171%.

Result Highlights

· During 1QFY23, net sales surged up 13% YoY to PKR 24,296mn due to higher sales across all segments, supporting the overall jump. However, sales declined by 14% QoQ due to change of NutriCo Morinaga to associates from subsidiary.

· Gross margins of the company went down by 212bps YoY to 20.3% during 1QFY23. The decline in gross margins was led by higher coal prices, which is up by 133% YoY compared to the same period last year, we view.

· During 1QFY23, ICI booked an exchange loss of PKR 222mn amid PKR depreciation.

· Finance costs of the company went up by 119% YoY | 15% QoQ to PKR 478mn during 1QFY23 due to augmented short-term borrowing along with higher interest rates.

· Effective tax rate during 1QFY23 settled at 31% compared to 16% during 1QFY22, given the imposition of super tax through Finance Act, 2022.

Recommendation

· We have a BUY call on the scrip with a Jun’23 target price of PKR 1,008.86/share.Courtesy – AHL Research