By: Arif Habib Limited
ENGRO: 9MCY15 earnings to jump by 2.2x YoY Engro Corporation Limited is scheduled to announce its 3QCY15 results today. The company is estimated to register consolidated net earnings of PKR 3,170mn (EPS: PKR 6.05) down 27% QoQ compared to PKR 4,369mn (EPS: PKR 8.34) recorded in the previous quarter, taking 9MCY15 profitability to PKR 11,173mn (EPS: PKR 21.33), a massive jump of 2.2x on YoY basis. The quarterly decline in the profitability is mainly attributable towards 28% QoQ decline in the profitability of fertilizer business amid 19% lower urea offtake during the quarter coupled with 31% QoQ decline from food business on account of lower margins. Furthermore, chemical business remains under pressure and posted loss after tax of PKR 379mn during the quarter.
On YoY basis, the company is expected to register 2.2x YoY growth mainly on account of 28% YoY higher profitability from fertilizer business, thanks to concessionary gas which was available since Mar-15. Furthermore, food business posted 10.3x YoY growth amid margin improvement and volume uptick in the dairy segment. However, chemical business posted LAT of 813mn in 9MCY15 vs. LAT of PKR 33mn in SPLY.
At current price level of PKR 304.8/share, the stock of ENGRO offers a massive upside potential of 53% to our target price of PKR 467/share. Based on aforementioned, we recommend a strong ‘BUY’.