Elixir Securities Limited – Result Preview

Karachi, February 16, 2015 (PPI-OT): CY14 results to remain subdued

ENGRO is scheduled to announce its CY14 financial results on February 17, 2014. The company is expected to post EPS of PKR13.00 (at current number of shares), down 17% YoY.

4QCY14 EPS shall clock in at PKR4.52, up 4% YoY and 35% QoQ. Elixir Securities Limited expects the company to announce cash payout of PKR2/sh along with the results, taking full year payout to PKR4/sh. Despite robust results by EFERT (49% YoY), CY14 earnings for ENGRO shall remain subdued primarily on account of poor performance within the rice segment.

Eximp is estimated to contribute loss of PKR3.3bn to ENGRO in CY14, relative to profit of PKR59mn in CY13, primarily owing to huge losses in the rice business post decline in international prices for the commodity. The polymer business also added to ENGRO’s woes during CY14 as unfavourable vinyl chain prices caused EPCL to post loss of PKR1.02bn. Furthermore, lower margins on the dairy business and impairment charges on Canadian operations kept EFOOD’s profitability in check.

Turnaround likely in CY15

The company is expected to post a strong turnaround in CY15 on the back of improved outlook for the fertilizer and dairy segments coupled with lower losses from the rice and polymers business. EFERT and EFOODS are expected to post earnings growth of 62% and 1.7x YoY during the year as the former is likely to start receiving concessionary gas while the latter is anticipated to display sharp margin expansion. ENGRO is expected to scale down, if not discontinue, the rice business due to consistent losses since inception. In addition to this, initiation of LNG business shall also add PKR1.96/sh to earnings for ENGRO in CY15.

Among Elixir Securities Limited’s top picks in the fertilizer space

ENGRO is among Elixir Securities Limited’s top picks in the fertilizer space. The company is trading at a CY15 PER of 8.6x and a discount of 26% to the stake adjusted market value of its listed subsidiaries. Elixir Securities Limited’s SOTP-based Dec-15 PT of PKR332 for the stock offers total return of 21% at last closing. Elixir Securities Limited maintains BUY!

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