AKD Quotidian about — EPCL: 1HCY13 Result Preview

Karachi, July 30, 2013 (PPI-OT): EPCL is scheduled to announce its IHCYI3 result on Aug 0513. AKD Securities expects the company to post NPAT of PkR54Omn (EPS: PkR0.81) in 1 HCYI3, up by a significant 9x YoY.

According to AKD Securities major factors behind the substantial projected rise in IHCYI3 earnings are i) 383bps YoY jump in GMs to 22%on slightly better PVC-Ethylene PMs as well as improved VCM production and ii) 33%YoY reduction in financial charges.

For 2QCYI3, AKD Securities expects sequential earnings growth of 5% (NPAT of PkR2Y7mn, EPS of PkRO.42), where the earnings accretion is expected on slight uptick in PVC-Ethylene PMs (+2%QoQ) while AKD Securities expects volumetric sales to depict a largely flattish trend. At current levels AKD Securities has a Buy recommendation on EPCL which offers 28% upside to AKD Securities TP of PkR17.1/share.

EPCL: 1HCY13 Result Preview

 (PkRmn)             1HCYI3F   Y0Y  2QCYI3F  QoQ

 Net sales           11,346    20%    5459  -1%
 Gross profit         2,516    45%   1,295   6%
 SandA expense          911    14%     450  -2%
 Other op. expenses     257   -29%     143  26%
 Operating profit     1,391    41%     726   9%
 Financial charges      614   -33%     303  -3%
 PBT                    777   911%     423  19%
 PAT                    540   813%     277   5%
 EPS (PKR @663mn sh.)  0.81   0.42

Source: AKD Research
MEBL: 1HCY13 Result Review
With AKBL’s IHCYI3 result influenced by a book cleanup exercise, MEBL% result announcement earlier today is a better benchmark to gauge incoming banking sector results. On an unconsolidated basis, MEBL has posted NPAT of PkRI,933mn (EPS: PkRI.93) in IHCVI3 vs. NPAT of PkRI,844mn (EPS: PkRI.84) in IHCYI2, translating into modest 5%YoY growth.

In 2QCYI3 alone, MEBL has posted NPAT of PkR95lmn (EPS: PkRO.95) which is flattish on a YoY basis and down by just 3%QoQ. Alongside the result, MEBL has announced a cash dividend of PkRI.50/share (payout ratio: 78%). Key highlights of the IHCYI3 result included 1) 5%YoY NIl growth, 2) negligible provisions, 3) 12%YoY non-interest income growth partly due to higher capital gains and 4) increase of 17%YoY in non-interest expenses (continued branch network expansion).

Going by MEBL’s result, where AKD Securities flags stable Nil, improving asset quality and propensity to book capital gains, AKD Securities reiterates that the Big-5 Banks as a group may end up posting marginal sequential growth in 20CY13. With the interest rate cycle having likely bottomed out already, AKD Securities believes the recent correction in banking sector shares opens up selective opportunities to build positions. AKD Securities retain preference for UBL and BAFL while flagging NBP’s high DIV (11.8%).

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