LOTCHEM has reported NPAT of PKR2.6bn (EPS: PKR1.73) in 1QCY21, up a sharp 60% yoy and 85% qoq. This is a strong earnings beat vs. our estimated NPAT of PKR1.3bn (EPS: PKR0.87), where the major deviation stemmed from higher-than-expected PTA-PX spreads. The result accomplished without any payout, in line with our expectation, as the company has track record of paying dividends in 3Q.
Key takeaways from 1QCY22 result include:
Revenues have clocked in at PKR20.3bn, in line with our expectation of c.PKR20.0bn, up 39% yoy and 7% qoq. The strong revenue growth is due robust sales to the Textile sector, in our view. To recall, Textile sector exports have increased by a sharp c.25% yoy during in 1QCY22.
The company has posted all time high gross margins of 19.7%, which improved by 4.3ppt yoy and a sharp 7.7ppt qoq. Premium over international PTA prices is likely to have led to the deviation vs our estimated GMs of 10.3%, in our view.
Other income has clocked in at PKR376mn, up 35% yoy and 3.3x qoq. This is slightly higher than our estimated PKR343mn, majorly due to elevated policy rate and short term investments, in our view.
Distribution and selling expenses clocked in at PKR39mn, up 34% yoy and 14% qoq amid increase in transportation expense, whereas Admin expense clocked in at PKR125mn, up 9% yoy and 11% qoq.
This is a strong result by LOTCHEM, despite retraction in PTA-PX spreads from its recent high of US$185/ton. In light of the present growth momentum coming from Textile sector, our near term outlook remains positive on LOTCHEM as PTA-PX spreads remain elevated. In light with current quarter result and longer than expected sustained spreads of PTA-PX, we look to revisit our estimates upon availability of quarterly accounts.