Earnings Report /
Pakistan

Tariq Glass Industries Ltd: 3QFY22 Result Review: All time high GMs backed by better pricing power

  • TGL has posted 3QFY22 NPAT of PKR1.2bn (EPS: PKR8.83), down 18% qoq but up 92% yoy

  • Pricing power is strong. Gross Margins have improved by 1.7ppt qoq and 7ppt yoy to nearly 32%

  • We maintain a Buy on TGL with a TP of PKR179/sh, backed by a swift growth trajectory

IMS Research Team
Intermarket Securities
26 April 2022

TGL has posted 3QFY22 NPAT of PKR1.2bn (EPS: PKR8.83), nearly doubling yoy but down 18%qoq. The sequential reduction in profitability is due to lower sales (seasonality and temporary unavailability of the tableware glass furnace). However, GMs have reached a record high of almost 32%, driven by higher float and tableware prices. The result takes 9MFY22 NPAT to PKR3.8bn (EPS: PKR27.92), up 135% yoy.

Key takeaways from 3QFY22 result include:

  • Net Sales of PKR6.7bn are slightly subdued, down 17% qoq but up 32% yoy. The qoq decline is likely due to a seasonal slowdown in construction activity which led to reduced volumes of float glass, in our view.

  • Gross Margins have improved by 1.7ppt qoq and a sharp 7ppt yoy to 31.9%. We believe the increase in GMs is attributed to better inventory management and increase in the prices of tableware and float glass during the quarter.

  • Admin and Distribution expenses have risen by c.20% qoq to PKR224mn. Note that TGL’s exports have been increasing; this could have contributed to greater selling expenses, in our view.

  • Among other line items (i) Finance costs of PKR81mn are up 8% qoq, and (ii) effective tax rate clocked in at 29% for the quarter against 30% in SPLY.

Despite the decline in quarterly volumes, TGL has posted all-time high GMs and impressive profits during the quarter. The company has recently notified that one of its float glass furnaces will be offline for up to six months for repairs, but the demonstrated ability to sustain and even grow margins should be a mitigating factor. We retain our liking for TGL, where we have a June’23 Target Price of PKR179/sh.