Earnings Report /
Pakistan

Engro Corporation: 3QCY22 Review: Surprise payout backed by strong earnings

  • ENGRO announced 3QCY22 consolidated NPAT of PKR8.2bn (EPS: PKR13.91) as compared with EPS of PKR10.62 in SPLY, up 31%YoY

  • The result announcement was accompanied by a surprise interim cash dividend of PKR10.0/sh.

  • ETR has reduced to 23% as compared to 30% in 3QCY21. This is despite elevated tax rate amid imposition of 4% super tax

Intermarket Securities
19 October 2022

Engro Corporation (ENGRO) announced 3QCY22 consolidated NPAT of PKR8.2bn (EPS: PKR13.91) as compared with PKR6.1bn (EPS: PKR10.62) in SPLY, up 31% YoY. Higher other income and lower expenses majorly contributed to the jump in earnings. The result announcement was accompanied by a surprise interim cash dividend of PKR10.0/sh, which is in addition to PKR23.0/sh announced in 1HCY22.

Key result highlights for 3QCY22:       

  • Despite the decline in revenue in the Fertilizer and Chemical businesses, ENGRO’s net revenues increased by 8% YoY to PKR91.3bn, mainly on account of higher revenues from the Power, Towers and other businesses.

  • Gross margin of the company have increased by 1.9ppt YoY (down 1.1ppt QoQ) to 29%. The YoY increase in GMs is majorly attributable to decent margin growth posted by EFERT and EPCL.

  • Finance costs jumped by 98% YoY to PKR7.1bn, compared to PKR3.6bn in 3QCY21, due to new debt drawn to expand the towers business amidst higher interest rates.

  • Among other line items: (i) distribution expenses have increased by 4% YoY to PKR2.1bn in 3Q, largely due to higher transportation expenses amid elevated fuel costs, and (ii) effective tax rate has reduced to 23% as compared to 30% in 3QCY21. This is despite elevated tax rate amid imposition of 4% super tax. We await detailed financials for more clarity.

We expect earnings momentum for ENGRO to continue in 4QCY22 amidst better earnings outlook of the fertilizer business and expected growth coming from the tower business and others. The future cash payout prospects also appear healthy backed by likely commencement of dividends from Engro Powergen Thar. We have a Buy stance on the scrip with a TP of PKR350/sh