Equity Analysis /
Pakistan

AGP Limited: 4QCY19 preview – Closing on a strong note

  • AGP is expected to post 4QCY19 NPAT of PKR341mn (EPS: PKR1.22), up 35%yoy and 6%qoq which takes CY19 EPS to PKR 5.02.

  • We expect margins to remain largely steady at c. 57%.

  • AGP trades at a CY20f P/E & P/S of 15.2x / 3.9x respectively, with Dec’20 TP of PKR100/sh, Neutral stance on the stock.

Yusra Beg
Yusra Beg

Senior Investment Analyst

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Intermarket Securities
12 March 2020

AGP is expected to post 4QCY19 NPAT of PKR341mn (EPS: PKR1.22), up 35%yoy and 6%qoq. This is expected to take CY19 NPAT to PKR1,405mn (EPS: PKR 5.02). We expect margins to remain largely steady at c. 57%, where despite 5-6%qoq devaluation in 3Q (impact with a 90 days lag), Jun’19 CPI price is likely to have offset this. We expect AGP to announce a dividend of PKR1.25/sh alongside results. 

4QCY19 key expectations 

  • We expect AGP to post sales of PKR1,562mn, up a strong 16%yoy, to take CY19 sales to PKR6,134mn, up 14%yoy. This is likely to be led by both seasonal growth in volumes and impact of the CPI-linked price hike announced in Jun’19. 
  • GMs are expected to remain largely stable at 56.5% vs. 56.4% in SPLY. While the PKR slipped 5-6% during 3Q, we expect this to be offset by the CPI price hike announced in Jun’19. Translation takes place with a 90 days lag. 
  • We expect AGP to continue to display strong cost control with selling and distribution expenses expected to come off 2%yoy although finance costs are expected to rise 20%yoy, due to higher interest rates. 

AGP is expected to maintain margins in a difficult operating environment due to better cost absorption ability. The stock trades at a CY20f P/E and P/S of 15.2x and 3.9x respectively, and seems fairly priced at our Dec’20 TP of PKR100/sh. We maintain our Neutral stance on the name.