Lotte Chemical Pakistan Limited (LOTCHEM) announced its 3QCY21 financial result today where the company posted a profit after tax (PAT) of PKR 628mn (EPS: PKR 0.41), down by 34% YoY compared to PKR 951mn (EPS: PKR 0.63) during SPLY. On a QoQ basis also, earnings went down by 35%. This takes 9MCY21 earnings to PKR 3,230mn, (EPS: PKR 2.13) compared with earnings of PKR 867mn (EPS: PKR 0.57) during 9MCY20. The company also announced a cash dividend of PKR 1.5/share along with the result.

Result Highlights

· During 3QCY21, net sales went up by 59% YoY to PKR 17.3bn due to 67% YoY rise in PTA prices. Cumulatively, sales increased by 79% YoY to PKR 48.2bn during 9MCY21 due to higher production along higher PTA prices compared to same period last year.

· During 3QCY21, the company witnessed gross profits margins of 8.1% compared with 12.3% during 3QCY20. The decline in gross margins is witnessed due to higher price premium during 3QCY20 compared to 3QCY21, we view. However, PTA margins have increased by 46% YoY during 3QCY21.

· Finance cost increased by 15x to PKR 577mn during 3QCY21 due to exchange loss, we view.

· Other income went up by 9% YoY to PKR 290mn during 3QCY21 due to higher levels of short term investments.

Recommendation

Currently, we have a “HOLD” call on the stock with a Dec’21 TP of PKR 15.4/share.

Courtesy – AHL Research