By: JS Global Capital Limited
We expect 9M2015 earnings of Engro Foods Limited (EFOODS) to clock in 11x YoY higher at Rs2,842mn (EPS Rs3.71) on the back of (1) increase in topline (driven from Dairy segment), (2) expansion in gross margins and (3) decline in operating expenses on the back of economies of scale.
On a quarterly basis, earnings for 3Q2015 are expected to clock in at Rs864mn (EPS Rs1.13), against a loss of Rs77mn (LPS RS0.10) in 3Q2014, translating to a decline of 5% QoQ.
Our ‘Buy’ rating on EFOODS remains intact with a Target Price of Rs191, offering a potential upside of 24%.
WMP prices average 20% QoQ and 32% YoY lower at US$1,987/ton during 3Q2015, where lower WMP prices are likely to further boost EFOODS’ gross margins in the 3Q2015.