Unity Foods Limited (UNITY) announced its financial result for 4QFY21 whereby the company declared a profit after tax (PAT) of PKR 505mn (EPS: PKR 0.51) compared to profit of PKR 172mn (EPS: PKR 0.17) in 4QFY20. This takes FY21 profit to PKR 3,338mn (EPS: PKR 3.36) compared to profit of PKR 214mn (EPS: PKR 0.22) during SPLY. The jump in earnings during FY21 was owed to growth in volumes and higher selling prices.

Result Highlights

· Topline of the company settled at PKR 19,036mn in 4QFY21, up by 93% YoY. The jump in sales is due to massive growth in overall sales volumes. During FY21, topline witnessed a massive growth of 126% YoY to PKR 68,831mn. Surge in international palm oil prices has helped the company to earn healthy margins along with increase in demand of consumer packs which is a high margin product.

· The company posted a gross profit of PKR 1,329mn with gross margins set at 6.98% in 4QFY21 compared to gross profit of PKR 586mn (5.95%) in SPLY. The jump in gross margins is attributable to massive increase in international palm oil prices and growth in sales volumes. Similar trend was witnessed in FY21. On sequential basis, gross margins of the company decerased by 143bps due to decline in international palm oil prices, higher discounts offered for product penetration and higher freight cost resulting in lower gross margins.

· Other operating income settled at PKR 120mn in 4QFY21, down by 65% YoY while up by 7% QoQ.

· Meanwhile, finance costs increased by 117% YoY to PKR 323mn amid higher reliance on borrowings to meet working capital and capital expenditure requirments.

Recommendation

Currently, we have a ‘BUY’ call on the stock with our Jun’22 target price of 54.4/share. We expect company to maintain its growth momentum given strong liquidity position, diversification plans, rising footprint, growing customer base, growth in local edible oil market (3% per annum) and increasing reach of company’s branded oil sales.

Courtesy – AHL Research