Earnings Report /
Pakistan

ICI Pakistan: 1QFY23 Result: Lower revenue led to earnings attrition; in-line with expectation

  • ICI posted consolidated net profit of PKR1.9bn in 1QFY23 (EPS: PKR19.49), down 50% YoY but up 2.7x QoQ

  • Net sales clocked in at PKR24.3bn, much lower than our expected topline of PKR26.9bn.

  • GM dipped slightly by c.1.6ppt QoQ and 2.1ppt YoY to 20.3% in 1QFY23, slightly lower than our expected GMs of 20.6%.

Intermarket Securities
20 October 2022

ICI posted consolidated net profit of PKR1.9bn in 1QFY23 (EPS: PKR19.49), down 50% YoY but up 2.7x QoQ. This is in-line with our EPS expectation of PKR20.16. ICI did not announce a dividend payout this quarter, as the company has a history of paying dividends biannually.

Key highlights of 1QFY23

  • Net sales clocked in at PKR24.3bn, much lower than our expected topline of PKR26.9bn. Lower PSF volumes and prices, along with flattish Soda Ash volumetric sales, likely hindered.

  • Gross margin dipped slightly by c.1.6ppt QoQ and 2.1ppt YoY to 20.3% in 1QFY23, slightly lower than our expected GMs of 20.6%. The reduction in margins is majorly led by higher energy raw material prices coupled with slower demand growth, in our view.

  • Pre-tax earnings, excluding re-measurement gains from Nutrico Pakistan pvt ltd. (NPPL) consolidation from last year, pre-tax earnings decline by 9%. Thus, the absence of one-off from last year led to major earnings decline of 50% in 1QFY23.

  • Among other line items: i) finance cost clocked in at PKR478mn, up 119% YoY and 15% QoQ amid higher debt and interest rates, ii) other income came in at PKR109mn, in line with our expectations, and iii) exchange losses clocked in at PKR222mn, which was down 42% QoQ amid decreased foreign currency exposure, in our view.

  • The effective tax rate clocked in at 31% in 1QFY23, down substantially from 76% in the previous quarter. The later was due to the imposition of one-off super tax in 4Q.

ICI has posted decent margins and profitability in 1QFY23, despite the headwinds in the shape of elevated COGS and slower demand. While there are still headwinds to demand in the near term, the medium term growth trajectory is still intact, especially as the Pharma and Life Sciences segments are expected to grow. Potential acquisition of LOTCHEM (subject to final bidding) is likely to further add value to the company.  We reiterate a buy on the script with a Target Price of PKR997/share.