By: Pearl Securities Limited
Improving sales backed by lower manufacturing expenses has derived strong growth for Pakistan Cables Limited (PCAL) during 1H FY15. Financials announced on the 19th of Jan’15 shows net earnings improve by as much as 29% YoY with NPAT of PKR 87mn (EPS: PKR 3.06) against PKR 67mn (EPS: PKR 2.37) achieved in the same period last year. Fundamental merits derived strong investor excitement towards the stock which has appreciated by 66% during YTD FY15 to reach PKR 165.84 by the 10th of Feb’15 while reaching all time high of PKR 204.25 on the 16th of Jan’15.
Chance of better dividends: Growing earnings derived solely from core business could encourage management to raise cash rewards to shareholders by 22%-33% with full year results. Observing the company’s cash reward trend to see dividends increasing every year since FY10. Last year, FY14, PKR 4.5/share was paid out. We believe, for FY15, the firm may decide on cash dividend in the range of PKR 5.5-6/share.
Company Outlook: With strong development in both public and private sectors, the company’s sales are expected to remain strong in 2H FY15. Low input costs and cost control measures will likely maintain gross margins at favorable levels. Stress from growing OPEX and finance costs is apparent. There is a chance that management may issues upgraded cash reward in the range of PKR 5.5-6/share with full year results. Based on recent turnaround story we except, the share price has potential to attract investors’ attention and may appreciate towards its real value, revealing an upside potential of 27% to chase its Target Value of PKR210. Buy