AKD Securities Limited – Off the Analyst’s Desk

Karachi, August 20, 2019 (PPI-OT): ENGRO: 2QCY19 EPS witnesses sequential decline due to one-offs

Engro Corporation Ltd (ENGRO) posted 2QCY19 earnings of PKR2.87bn (EPS: PKR4.97), up 37% YoY but down 29% QoQ. This takes the 1HCY19 NPAT to PKR6.87bn (EPS: PKR11.92), up 3% YoY.

The sequential decline in earnings is attributable to: (i) 191% QoQ higher operating expenses (EPCL recorded 673% QoQ higher operating expense due to IFRS 16 implementation and exchange losses), (ii) 107% QoQ higher finance cost amid 200bps QoQ interest rate hike, and (iii) higher effective tax rate of 50% during the quarter vs. 31% in the 1QCY19 (EFERT reversed tax credit recorded in 2QCY18).

ENGRO also announced second interim cash dividend of PKR8.0/sh, taking the 1HCY19 payout to PKR15.0/sh vs. PKR12.0/sh in 1HCY18. However, the sustainability of payouts is contingent upon progress on potential ventures, where ENGRO has announced feasibility study on polypropylene facility.

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