By: Elixir Securities Private Limited
9MFY15 earnings underperformed expectations: Tariq Glass Industries Limited announced its 9MFY15 earnings at PKR3.32/sh, significantly above loss of PKR2.09/sh during the same period last year. 3QFY15 EPS clocked in at PKR0.02 against LPS of PKR3.29 in 3QFY14. However, earnings for the quarter underperformed estimates primarily owing to lower than expected sales. Our discussions with company management suggest that sales were lower as the company faced depleting stocks of different tableware varieties during the quarter.
GIDC imposition not as negative as feared earlier: The GIDC Act 2015 brought two positive surprises for TGL: (i) the government waived all prior payables for industrial consumption, and (ii) it decreased the cess applicable to the industrial sector by PKR50/mmbtu. Even though TGL will have to pay prior amounts owed for CPP consumption, its quantum remains small in overall gas consumption. Due to the GIDC waiver, we expect the company to book a PKR25mn reversal against prior provisions.
Double digit earnings expected in FY16: With re-commissioning of its tableware furnace after 7 month shutdown, TGL is expected to avail full benefit of the reduction in international oil prices in the near term. We expect EBITDA for the tableware segment to clock in at 1.4bn in FY16, up 65% YoY, contributing 79% to overall EBITDA of the company. Furnace commissioning, coupled with low oil prices, shall allow TGL to post EPS of PKR10.6 in FY16, up 68% YoY.