Earnings Report /
Pakistan

Engro Polymer & Chemicals Ltd: 2QCY22 Result Review - Earnings beat driven by taxation

  • EPCL has posted NPAT of PKR2.3bn for 2QCY22 (EPS: PKR2.57); down 25% YoY and 50% QoQ.

  • The company also announced an interim cash dividend of PKR2.5/sh vs. our estimated DPS of PKR1.25.

  • Effective tax rate clocked in at 58% versus 25% in SPLY. The increase in tax rate is due to one-off super tax impact.

Intermarket Securities
11 August 2022

EPCL has posted NPAT of PKR2.3bn for 2QCY22 (EPS: PKR2.57); down 25% YoY and 50% QoQ. The result came in higher than our expected EPS of PKR1.25, with deviation stemming from higher-than-expected gross margins and lower effective tax rate. The company also announced an interim cash dividend of PKR2.5/sh vs. our estimated DPS of PKR1.25.

  • Net Sales clocked in at PKR22.3bn (lower than our estimated topline of PKR23.6bn), down 4% QoQ but up 50% YoY, owing to higher demand and international PVC prices.

  • GMs decreased by 1.4ppt YoY to 33.8%, but higher than our expectation of 32%. The decline in gross margin is due to lower core delta, which has retracted from all-time high levels of c.US$1,145/ton in November’21 to an average of US$784/ton in 2QCY22.

  • Other Expenses clocked in at PKR1.28bn, double than in the prior year, due to low base effect and exchange losses, in our view. 

  • Finance cost clocked in at PKR737mn, up a sharp 44% YoY, on account of higher interest bearing debt and interest rates during the quarter.

  • Effective tax rate clocked in at 58% versus 25% in SPLY. The increase in tax rate is due to one-off super tax impact. However, this is still lower than our expectation of 75%.

The company has posted a decent result in 2Q. Although international spreads have moderated recently, the interim payout (PKR 2.5/sh) instills confidence in EPCL’s payout outlook, in our view. We believe international PVC-Ethylene spreads are likely to rebound and could help the company post improved profits in the coming quarters. We look to revisit our estimates following availability of detailed quarterly accounts.