JS Securities Limited – Global

Karachi, October 19, 2016 (PPI-OT): EFOODS: 3Q2016 EPS stood at Rs0.83, up 2% YoY

Engro Foods (EFOODS) announced 3Q2016 results today, where the company posted earnings of Rs633mn (EPS Rs0.83), up 2% YoY; while gross margins clocked in at 21% (-57bps YoY, -6ppt QoQ). Cumulatively, 9M2016 earnings posted flat growth, clocking in at Rs2.60bn (EPS Rs3.38).

Decline in top-line during 3Q2016 (-12% YoY) resulted in lower gross margins for 3Q2016, however savings in other operational expenses led to Operating margins to improve to 9% (+118bps YoY). On a sequential basis, profitability of the company declined by 26% QoQ, as the preceding quarter held seasonally higher margins. The stock trades at a discount to peer multiples at 29.6x P/E and 2.2x P/S.