Equity Analysis /

AGP Limited: 2QCY19 preview: Recent price hike may result in earnings growth

    Yusra Beg
    Yusra Beg

    Senior Investment Analyst

    Intermarket Securities
    5 August 2019

    AGP Limited (AGP) is expected to post 2CY19 NPAT of PKR322mn (EPS: PKR1.15), up 13%yoy, taking 1HCY19 NPAT to PKR747mn (EPS: PKR2.67), up 10%yoy. We do not expect any dividends to be announced.

    Sales revenue is expected to rise to PKR1,456mn (up 11%yoy). This is driven by flat 15% price hike received in 1QCY19, which should help offset 13% PKR devaluation in 1HCY19. 

    This should lead to strong bottom-line translation, in our view (2QCY19f: GMs: 59%, vs. 58% in 1QCY19, 59.3% in 2QCY18), while price reversal on hardship cases should have a nominal impact on pricing, in our view. We highlight AGP has been relatively more resilient to Fx volatility due to a better product mix.

    We expect admin expenses to remain marginally elevated, while we expect effective tax rate to gradually accelerate over time (2QCY19f: 18.5%). 

    We currently have a Dec'19 TP of PKR113, however we will revisit our estimates post AGP's investor briefing on 8th Aug'19.

    Risks: (i) Further regulatory tightening by DRAP, (ii) persistent depreciation of the rupee (iii) rising counterfeit and smuggled products and (iv) slowing exports.