LOTCHEM announced its 2QCY21 result today

Lotte Chemical Pakistan Limited (LOTCHEM) announced its 2QCY21 result today whereby the company posted below-expected earnings of PKR 1.0Bn (EPS: PKR 0.64), up by 48x YoY, taking 1HCY21 profitability to PKR 2.6Bn (EPS: PKR 1.72). Better profitability during the period was primarily on account of downstream demand recovery in PSF segment and improved primary margins. On the other hand, the sequential decline in earnings by 41% is likely due to absence of inventory gain booked in 1QCY21 and recognition of exchange loss. Key highlights of the result are discussed below:

During 2QCY21, net revenue increased 3.7x YoY to PKR 16.3Bn owing to downstream demand recovery post-pandemic related lock-downs imposed last year and surge in PTA prices (↑ 1.6x YoY). This takes the 1HCY21 top line to PKR 30.9Bn, up 92% YoY.

Consequently, gross margins improved to 10% in 2QCY21 as compared to a gross loss of 1% in the SPLY due to higher realized primary margins (↑ 1.3x YoY). On the other hand, the sequential decline of 5ppts in gross margins was likely on account of higher input costs (paraxylene) and absence of inventory gain booked in 1QCY21.

During the period, the company recorded finance cost of PKR 299Mn in 2QCY21 as opposed to finance income of PKR 79Mn in SPLY probably due to recognition of exchange loss.

On the other hand, other income surged by 11% YoY to reach PKR 0.3Bn during 2QCY21 owing to higher level of short-term investments.

We reiterate our BUY stance on the scrip with our Jun’22 TP of PKR 21.0/sh, implying an upside of 35% from the last close.

Courtesy – BMA Capital Management Ltd.

Sharing is caring

Leave a Reply