By: Elixir Securities Private Limited
Operating earnings underperformed expectations in 1HFY15: Tariq Glass Industries Limited posted 1HFY15 EPS of PKR3.30, up 1.8x YoY and higher than our expectation of PKR3.12. 2QFY15 earnings clocked in at PKR1.06/sh, up 2.4x YoY primarily due to tax reversal booked during the period; PBT for 2QFY15 remained 13% lower YoY. Operating profits remained lower in 2QFY15 as the company provided for GIDC (PKR96.9mn) of 1HFY15 during the quarter.
Retrospective GIDC application may dampen FY15 earnings: With the National Assembly standing committee having approved GIDC Bill 2014, we believe that it is likely that the Cess shall be imposed retrospectively post approval from the Senate. TGL has still not provided for PKR172mn worth of unpaid GIDC (for pre-FY15 periods) and may have to account for and disburse the funds in 2HFY15. This will result in an EPS impact of PKR1.55 and take FY15 EPS down to PKR4.99 (↓24% relative to our current estimates).
Tweaked estimates; Maintain Buy: We have tweaked our estimates for TGL and revise our FY15 EPS expectation to PKR6.54 (↑2%) after accounting for 1H results. However, we maintain our PT of PKR115/sh for the stock. At last closing, the stock offers potential upside of 120% in addition to a dividend yield of 1%. Buy!