Tag Archives: Arif Habib Limited

Morning Call about – ENGRO, LUCK, PSMC & ACPL – Arif Habib Limited

Karachi, October 28, 2014 (PPI-OT): ENGRO: 3QCY14 EPS expected at PKR 3.35/share, up 86% YoY

Engro Corporation Limited is scheduled to announce its 3QCY14 results on October 29, 2014. The company is estimated to register consolidated net earnings of PKR 1,730mn (EPS: PKR 3.35) up by +86% QoQ compared to PKR 928mn (EPS: PKR 1.79) recorded in the previous quarter, taking 9MCY14 profit after tax to KR 4,893mn (EPS: PKR 9.47), down 14% YoY.

The quarterly jump in the profitability is mainly attributable towards 10% jump in profitability of fertilizer business coupled with some recovery expected in Eximp rice business. On the other hand food business remained depressed and posted loss after tax (LAT) of PKR 77mn in 3QCY14.

Likewise, chemical business remains under pressure as well which posted LAT of PKR 157mn during the period. At current price level of PKR 165/share, the stock of ENGRO offers a massive upside potential of 76% to Arif Habib Limited’s target price objective of PKR 290/share. Based on aforementioned, Arif Habib Limited recommends a strong ‘BUY’.

LUCK: 1QFY15 EPS expected at PKR 8.22/share, +4% up YoY

The board of directors of Lucky Cement Company Ltd (FCCL) is scheduled to meet on 30th Oct’14 to approve its 1QFY15 financial result. Arif Habib Limited expects net earnings to clock in at PKR 8.21/share in 1QFY15 (+4% YoY).

A 10% YoY rise in retention prices coupled with 9% YoY higher dispatches (with mainly 17% YoY growth in local dispatches) is expected to improve gross profit by 20% YoY to PKR 5.05bn (with GP margins to improve by 100 bps YoY to 45.6% in 1QFY15). Arif Habib Limited believes selling/distribution expenses to surge by 48% YoY to PKR 1,026bn on higher export freight charges.


LUCK – Financial Highlights

PKR mn 1QFY15E 1QFY14A YoY 4QFY14A QoQ
Net Sales 10,982 9,332 18% 11,628 -6%
Gross Profit 5,005 4,164 20% 5,000 0%
Gross Margins 45.6% 44.6% 43.0%
Selling Expenses 1,026 696 48% 824 25%
Other Income 244 221 10% 345 -29%
Profit after tax 2,656 2,546 4% 3,159 -16%
Earnings per
share (PKR) 8.21 7.87 9.77

Source: Company Financials, AHL Research

Recommendation

Arif Habib Limited’s based Dec-14 target price for the scrip works out to PKR 460.6/share, with an upside of 10.1% from current levels. Arif Habib Limited recommends ‘Buy’ on the scrip.

PSMC: 3QCY14 EPS expected at PKR 5.44/share, 24% down QoQ

The BOD of Pak Suzuki Motors Company Ltd (PSMC) is scheduled to meet on 29 th Oct’14 to approve its 3QCY14 financial result. Arif Habib Limited’s expectations for earnings are at PKR 5.44/share in 3QCY15 (-24% QoQ), to take 9MCY14’s cumulative earnings to PKR 18.01/share (-3% YoY).

Quarterly earnings decline can be attributed to sluggish car sales in 3QCY14 by an estimated 22%, as variants including Swift (-33% QoQ), Mehran (-24% QoQ), Bolan (-21% QoQ) and Cultus (-17% QoQ) lead the decline.

Arif Habib Limited expects gross margins on QoQ to improve by 42% bhps to 8.55% in 3QCY14 of the impact less of costlier CKD inventories (when PKR appreciated back in Mar’14) procured from a lag of 2 to 3 months.

On YoY basis 9MCY14 earnings are expected to decline by 3% YoY to PKR 18.01/share, owing to one-off gain worth PKR 274.5mn or PKR 3.0/share, realized on the sale of land of its old motor bikes factory in 2QCY13 with its reflection in other operating income as a result.


PSMC – Financial Highlights

PKR mn 3QCY14E 2QCY13A QoQ 9MCY14E 9MCY13A YoY
Net sales 11,360 15,412 -26% 40,467 38,949 4%
Gross profit 972 1,253 -22% 3,195 2,467 30%
Gross Margins 8.6% 8.1% 7.9% 6.3%
Dist. & admin exp. 389 555 -30% 1,337 1,067 25%
Other income 148 150 -1% 444 665 -33%
Profit after tax 447 592 -24% 1,482 1,528 -3%
EPS (PKR) 5.44 7.19 18.01 18.57

Source: Company Financials, AHL Research

Recommendation

Arif Habib Limited’s based Dec-14 target price for the scrip works out to PKR 307/share, offering a upside of 0.3% from current levels.

Arif Habib Limited recommends ‘Hold’ on the scrip, while Arif Habib Limited revisits Arif Habib Limited’s valuation and earnings post clarity on approval of the new Auto Industrial Development Policy (AIDP) by ECC while possible duty reduction on CKD units is on the cards from current ~32.5% to 25%.

ACPL: 1QFY15 EPS expected at PKR 3.90/share, 6% up YoY

The board of directors of Attock Cement Company Ltd (ACPL) is scheduled to meet on 30 th Oct’14 to approve its 1QFY15 financial result. Arif Habib Limited expects net earnings to clock in at PKR 3.90/share in 1QFY15 (+6% YoY).

In Arif Habib Limited’s view, a 10% YoY rise in ex-factory prices coupled with 1% YoY higher dispatches (with substantial +22% YoY growth in export dispatches – contrary to other cement companies) is expected to improve gross profit by 10% YoY to PKR 944mn. Arif Habib Limited also projects the other operating income of the company to increase by 1.02x YoY to PKR 109mn on higher quantum of returns on cash and cash equivalents.
ACPL – Financial Highlights


PKR mn 1QFY15E 1QFY14A YoY 4QFY14A QoQ

Net Sales 3,118 2,922 7% 3,334 -6%
Gross Profit 944 855 10% 1,043 -10%
Gross Margins 30.3% 29.2% 31.3%
Selling Expenses 257 228 13% 193 33%
Other Income 109 54 102% 91 20%
Profit after tax 446 423 6% 606 -26%
Earnings
per share (PKR) 3.9 3.69 5.29

Source: Company Financials, AHL Research

Recommendation

Arif Habib Limited’s based Dec-14 target price for the scrip works out to PKR 171/share, offering a downside of 2% from current levels. Arif Habib Limited recommends ‘Hold’ on the scrip.

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Morning Call about – DGKC and PPL – Arif Habib Limited

Karachi, October 23, 2014 (PPI-OT): 1) DGKC: 1QFY15 EPS expected at PKR 2.75/share, 13% up YoY

The board of directors of D.G. Khan Cement Company Limited (DGKC) is scheduled to meet on Oct 24, 2014 to approve 1QFY15 financial result.

Arif Habib Limited expects net earnings to clock in at PKR 2.75/share in 1QFY15, a healthy 13% YoY improvement as 8% YoY rise in Ex-Factory prices coupled with 5% YoY lower international coals prices is expected to improve gross profit by 7% to PKR 2.25bn. This Arif Habib Limited believes will mitigate the impact of a slight drop of 0.7% YoY in total dispatches of the company.

Arif Habib Limited expects financial cost of PKR 169mn in 1QFY15 from PKR 213mn from the corresponding period last year, projecting a drop of 21% as declining leveraging plays its part. While other operating income in 1QFY15 will reflect mainly the dividend income of associate company MCB (PKR 3.5/share).

Source: Company Financials and AHL Research

Financial Highlights


PKR mn 1QFY15E 1QFY14A YoY 4QFY14A QoQ
Net Sales 6,206 5,854 6% 6,936 -11%
Gross Profit 2,257 1,995 13% 2,885 -22%
Selling Expenses 343 321 7% 255 35%
Other Income 180 172 5% 210 -14%
Finance Cost 169 213 -21% 37 353%
Profit after tax 1,204 1,067 13% 2,022 -40%
Earnings per
share (PKR) 2.75 2.44 4.61

Recommendation

Arif Habib Limited’s DCF based Dec-14 target price for the scrip works out to PKR 129/share, translating into massive upside potential of 63% from current levels. Arif Habib Limited recommends a ‘Buy’ on the scrip, its underperformance of 9.1% since Jun’14 in Arif Habib Limited’s view is not justified.

2) PPL: 1QFY15 earnings to dip 3% YoY and 9% QoQ to PKR 6.16/share

PPL is scheduled to announce its 1QFY15 financial result on 24th Oct’14. Arif Habib Limited estimates the company’s earnings to trim by 3% YoY to PKR 6.16/share in 1QFY15 compared to earnings of PKR 6.33/share recorded in 1QFY14.

This earnings attrition can be linked to 35% higher exploration costs to PKR 9,143mn on account of higher 2D and 3D seismic activities, hinting the company’s aggressive exploration strategy coupled with lower other income.

Other income estimated to record a decline due to lower exchange gains. In 1QFY14A, exchange gains stood at PKR 522mn, contributing 24% to total other income; however during 1QFY15 exchange gains are expected to be minimal.

On a QoQ basis, PPL earnings is estimated to record a drop of 9% attributable to 1) higher expected effective tax rate of 31% compared to 27% recorded last quarter and 2) 4.54% decline in Arab light crude oil prices.


Financial Highlights
PKR mn 1QFY15E 1QFY14 YoY 1QFY15E 4QFY14 QoQ
Net Sales 30,076 27,782 8% 30,076 30,945 -3%
Field Expenditure 9,143 6,760 35% 9,143 9,490 -4%
Royalties 3,581 3,243 10% 3,581 3,636 -2%
Gross Profit 17,352 17,779 -2% 17,352 17,819 -3%
Other Opt. Income 1,622 2,162 -25% 1,622 1,583 2%
Finance Cost 105 106 -1% 105 106 -2%
EBT 17,736 18,844 -6% 17,699 18,161 -3%
Net Income 12,151 12,477 -3% 12,151 13,330 -9%

Source: Company Financials and AHL Research

Recommendation

Arif Habib Limited re-iterates Arif Habib Limited’s Buy stance on PPL with a Dec’14 TP of PKR 259/share.

Currently, PPL is trading at a FY15E PER of 6.4x compared to AHL E and P Universe PER of 8.5x, a discount of 24%, respectively.

Arif Habib Limited’s Justified PER for the company is 8.05x. Moreover, Arif Habib Limited of the views that the stock price of PPL has corrected 7.6% MTD on account of tumbling crude oil prices which is not justified, the market sentiments are overplayed.

PPL remains least affected from the decline in oil prices. For every USD5/bbl drop in from Arif Habib Limited’s base assumption of oil prices, the company earnings decline by 2.9% compared to OGDC and POL, which exhibit a sensitivity of 3.3% % and 4.3%.

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Morning Call about – Result Previews – Arif Habib Limited

Karachi, August 20, 2014 (PPI-OT): 1HCY14 earnings to jump by 25%YoY to PKR 9.27/share, BUY!

ENGRO to post 25% YoY jump in 1HCY14 earnings

Engro Corporation Limited is scheduled to announce its 1HCY14 result on August 20 th , 2014, where Arif Habib Limited expects the company to post consolidated net earnings of PKR 4,790mn (EPS: PKR 9.27) up massively by 25% YoY compared to PKR 3,827 (EPS: PKR 7.40) corresponding period last year.

EFERT: Major contributor towards ENGRO’s profitability

Engro Fertilizer remains the major contributor in 1HCY14 earnings as company posted PAT of PKR 3,375mn in 1HCY14 contributing 70% towards ENGRO’s profitability during the period. Better production and efficiencies amid, Guddu gas availability since Jul`13 coupled with 41% YoY jump in urea off-take were the major driver for remarkable growth during the period.

EPCL: lower margins lead towards earnings decline

Furthermore, chemical segment (Engro Polymer Limited) registered PAT of PKR 219mn, compared to PAT of PKR 239mn last year, down 8% YoY in 1HCY14.

Lower PVC, domestic caustic soda margins and PKR appreciation led towards this decline during the period.

EFOODS: still struggling hard

On the other hand, Food segment remained depressed as (Engro Foods Limited) posted PAT of PKR 329mn down by 70% YoY in 1HCY14. The turndown in food segment is due to lower margins taking impact of cost push inflation, as management focus remain towards gaining volumes rather than margins.

EXIMP: some improvement expected

Furthermore, Arif Habib Limited expects some recover in EXIMP business as DAP off-take jumped by a huge 20% YoY in 1HCY14 amid lower DAP prices as compared to competitor’s and better agri-dynamics during the year.

Recommendation

At current price level of PKR 176/share, the stock of ENGRO offers a massive upside potential of 70% to Arif Habib Limited’s SOTP based Dec’14 price target of PKR 300/share. Based on aforementioned, Arif Habib Limited recommends a strong ‘BUY’.

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Morning Call about – Pakistan Telecommunication Co. Telecom – Arif Habib Limited

Karachi, March 28, 2014 (PPI-OT): 1QCY14 earnings to clock in at PKR 0.72/share +10% YoY

In Arif Habib Limited’s today’s Morning Call, Arif Habib Limited highlights upon PTC’s result preview for the 1QCY14, PKR/USD appreciation impact on LDI revenues and latest updates on Telenor Pvt. Ltd’s partial exit from the International Clearing House (ICH) arrangement.

1QCY14 EPS to clock in at PKR 0.72/share +10% YoY
For the 1QCY14, Arif Habib Limited expects PTC to post a consolidated EPS of PKR 0.72/share depicting a +10% YoY growth from PKR 0.65/share in the corresponding period last year.

According to Arif Habib Limited, this is mainly on account of 42% YoY increase in broadband subscribers with growth primarily on EvDO wireless broadband segment and a 58% YoY drop in finance cost as Ufone paid off all its long debts (PKR 20.5bn). Arif Habib Limited believes this phenomenon of lower financial charges is temporary as PTC will take fresh heavy leverage positions going forward to fund its bid for 3G/4G spectrum next month.


Financial Highlights
PKRmn 1QCY14 1QCY13 QoQ
Net Sales 32,105 32,181 0%
Gross Profit 11,334 11,435 -1%
GP Margin 35% 36%
Other Income 1,041 1,233 -16%
Finance Cost 452 1,070 -58%
Profit after tax 3,671 3,331 10%
EPS – (PKR) 0.72 0.65
Source: AHL Research and Company Accounts

PTC’s LDI revenues to take a slight hit from a stronger PKR against USD
As Long Distance Int’l (LDI) revenues of PTC are collected from foreign operators in USD, Arif Habib Limited foresees an annualized minor 2% negative bottom-line impact of a 5% appreciation from Arif Habib Limited’s initial PKR/USD average assumption of 108 in CY14.

LDI minutes expected in Mar’14 and update on Telenor partial exit from ICH
Based on 23 days extrapolated of Mar’14, LDI monthly minutes are expected to clock in at ~480mn (-1% MoM from 486mn in Feb’14), which have remained in the range of 470mn-526mn since Nov’13. This has also outplayed concerns from the exit of Telenor LDI Pvt from ICH. As per latest developments, the matter of Telenor’s exit from ICH is still pending in Sindh High Court since Feb’14 (to recall earlier other LDI operators had taken a stay order). Its last hearing was held on 24th of Mar’14 which has now been deferred till 2th Apr’14. Exit of Telenor from ICH remains partial with it yet to start its full fledge LDI operations on its own.

Recommendation
Arif Habib Limited maintains Arif Habib Limited’s BUY stance on PTC with Dec’14 TP of PKR 36/share offering an upside of 18% from its last closing, the scrip is currently trading at a CY14E P/E and P/B of 8.9x and 1.46x. With Ufone one of the favorites to acquire 3G/4G spectrum to be held on 23rd Apr’14 and a potential revival in the Warid Telecom acquisition, Arif Habib Limited will then accordingly re-visit Arif Habib Limited’s investment case on PTC as per these developments.

The post Morning Call about – Pakistan Telecommunication Co. Telecom – Arif Habib Limited appeared first on AsiaNet-Pakistan.

Morning Call about – Auto Data Automobile and Parts – Arif Habib Limited

Karachi, March 11, 2014 (PPI-OT): Feb-14 Auto Sales registered a 7% MoM decline

As per the latest auto sales and production figures released by the Pakistan Automotive Manufacturers Association (PAMA), car and LCV sales were down by 7% MoM during Feb’14. This was on account of high base effect of Jan’14 from increased sales due to preference of new cars registration from the start of the New Year.

According to Arif Habib Limited, while cumulatively, auto sales increased 6% YoY in 8MFY14. Segment-wise breakup shows 1000-1300cc and above segment decreased by an avg. of 9.5% MoM, on 8MFY14 basis it has increased by an avg. of 11.5% YoY. The economy segment (below 1000cc) increased 14% MoM though decreased 7% YoY in 8MFY14.


Auto data Feb-14 Jan-14 MoM Feb-13 YoY 8MFY14 8MFY13 YoY
1300cc and above 5,816 6,698 -13% 5,874 -1% 37,879 35,848 6%
1000cc 1,392 1,474 -6% 1,169 19% 10,121 8,628 17%
<1000cc 2,874 2,531 14% 2,800 3% 19,106 20,642 -7%
Total cars 10,082 10,703 -6% 9,843 2% 67,106 65,118 3%
LCV's + 4×4 2,690 3,047 -12% 2,785 -3% 20,551 17,861 15%
Total 12,772 13,750 -7% 12,628 1% 87,657 82,979 6%

Company wise Feb-14 Jan-14 MoM Feb-13 YoY 8MFY14 8MFY13 YoY
PSMC 6,941 7,089 -2% 7,000 -1% 49,522 48,328 2%
INDU 3,505 3,992 -12% 3,588 -2% 22,676 21,847 4%
HCAR 2,232 2,600 -14% 2,015 11% 14,821 12,528 18%
Source: PAMA

Company-wise sales analysis
Pakistan Suzuki Motor Company’s (PSMC) sales were recorded at 6,941 units in Feb’14, down 2% MoM with cumulative sales in 8MFY14 were flat on YoY basis by +2%.

Indus Motor Company Limited’s (INDU) sales fell in Feb’14, to 2,232 units which was a 12% decline MoM. On cumulative basis in 8MFY14, company registered a sales growth of 4% YoY.

Honda Atlas Cars Limited’s (HCAR) sales also showed a downward trend with 12% MoM fall in Feb’14. While on 8MFY14 basis, company’s sales grew 18% YoY mainly owing to low base-effect of last year (when customers waited for Civics’ new model launch).

Tractors’ sales up 2.2x MoM!
Tractors’ sales during Feb’14 recorded a massive 218% MoM growth mainly on account of seasonal impact due to the start of Kharif season. In this regard, Millat Tractor’s sales recorded a substantial 4.6x MoM jump in Feb’14 to 1,060 units (8MFY14 cumulative at 33% decline YoY), while Al-Ghazi Tractors’ sales massively increased by 73% MoM to 545 units in Feb’14 while in 8MFY14 the cumulative sales declined at 37% YoY.

Recommendation
Arif Habib Limited maintains Arif Habib Limited’s Hold stance on INDU and PSMC both, with Arif Habib Limited’s Dec’14 Target Prices of PKR 380/share and PKR 169/share respectively. INDU and PSMC are currently trading at a FY14E and CY14E P/E of 8.46x and 7.43x.

The post Morning Call about – Auto Data Automobile and Parts – Arif Habib Limited appeared first on AsiaNet-Pakistan.

Morning Call about – Hascol Petroleum Limited – Arif Habib Limited

Karachi, March 04, 2014 (PPI-OT): Solid growth ahead; Subscribe

According to Arif Habib Limited, Hascol Petroleum Limited (Hascol) is undergoing an IPO of 25mn shares, out of which 18.75mn shares would be offered through book building at a floor price of PKR 20/share, while the remaining 6.25mn shares would be offered to the general public at the strike price determined through book building process.

Purpose of the issue
The company is planning to raise a minimum PKR 500mn equity through the issue to fund its Machike Storage Facility and expansion of the retail fuel network. HPL is planning to add 50 retail outlet during this year.

Arif Habib Limited recommends Arif Habib Limited’s investors to subscribe to the issue, with Arif Habib Limited’s Dec-14 target price of PKR 38/share, projecting an upside of 96% from the floor price. Arif Habib Limited’s liking for Hascol primarily stands due to its aggressive growth strategy mainly emanating from its expanding retail network and storage facilities. In addition, prudent credit policies for power sector has shielded the company from the illness of circular debt. At the offer price HPL is trading at a PER and PB of 3.2x and 0.7x based on CY14 earnings.

Rising volumes paved the way for growth
The company has posted a solid earnings growth at 119% CAGR during CY11-13 to PKR 4.38/share, which mainly stemmed from strong volumetric growth. This was mainly on account of aggressive market penetration strategy of the company which led its market share in MS and HSD improving from a meager 0.6% and 0.8% in FY11 to ~2% and ~2.5% in 1HFY14, respectively.

Infrastructural development sets the launching pad for future growth
Continuing its aggressive market penetration strategy, HPL has been focusing on improving supply chain dynamics with both back end storage facilities and expansion of retail fuel networks. The company plans to add another 91 fuel station till CY16 (current 210), out of which 50 retail outlets would be established in CY14 alone. To fuel its expanding retail outlets, the company has already commissioned a storage facility of 6,500MT in Shikarpur Sind, while another 6,500MT storage facility is expected to come online this year at the strategic location of Machike. This would be pave the way for future volumetric growth at 3 year CAGR of 23% in CY13-16 to ~1mn tons. The company is expected to post a solid earnings growth at 3 year CAGR of 42% to PKR 12.26/share in FY16 from PKR 4.33/share in CY13.

Prudent credit policy shielding from circular debt
Despite posting a healthy growth in the FO market (HPL had a market share of only ~1% in FY11 to 3.3% in 1HFY14), the company protected itself from the chronic circular debt problem by following a defensive commercial sales strategy. HPL has shielded its self from the issue through irrevocable financial instruments, while supplying HSFO to the debt ridden power sector.

Absorption of tax losses may lead to abnormally higher effective tax rate
As per the managements’s estimates, the company will keep on benefiting from low effective tax rate in next five years due to deferred tax advantage. However it is pertinent to mention here that available tax losses to the company till Dec-13 stand at PKR 320mn, exhaustion of which may drag the company in minimum turnover tax regime (0.5% of the topline), increasing its effective tax rate to 42%.

Offering attractive multiples
At the floor price, HPL available at a 16% and 27% lower PER and PBV offered by its listed peers based on CY13 figures. Healthy growth story, cheap multiples and market enthusiasm about IPOs lately is expected to keep the issue in the limelight.

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