Karachi, February 10, 2023 (PPI-OT): FCCL and INDU: 1HFY23 Result Previews

FCCL – earnings to clock in at PkR1.05/sh in 2QFY23: FCCL is slated to announce its 2QFY23 result on Feb 14, 2023, where we expect the company to report total earnings of PkR2.57bn (EPS: PkR1.05/sh) for the quarter vs. PAT of PkR2.32bn (EPS: PkR0.94/sh) in 1QFY23, up by 11%/75% QoQ/YoY. On the topline front, we expect the company to post robust growth of 26%/123% on a QoQ/YoY basis to clock in at PkR18.55bn during the period. The increase in the topline of company is majorly due to increased offtakes which clocked in at 1.34mn tons (up 25%QoQ), against offtakes of 1.07mn tons in the quarter previously, with the company also commissioning its 2.05mn ton Nizampur capacity (Brownfield) during the period, taking total company capacity to 8.4mn TPA.

Furthermore, we expect gross margins to clock in at 25.7% for the quarter vs. 28.7% in 1QFY23. The slight decline in margins is majorly due to higher fuel costs, which are estimated to be at PkR45.8k/ton vs. ~PkR43k/ton during the previous quarter. Another possible reason for higher than anticipated margins in the last quarter was the unprecedented buildup of closing stock (WIP/FG inventory), possibly due dampened offtakes amid heavy rains/floods during the period. Overall, we expect the company to close 1HFY23 with PAT of PkR4.88bn (EPS: PkR2.0/sh), up 73%YoY.

INDU – 2QFY23 earnings to clock in at PkR39.6/sh: We expect Indus Motor Company Limited (INDU) to post earnings of PkR3.1bn (EPS: PkR39.6) in 2QFY23, decreasing by 35%YoY but up 140%QoQ on the back of the dismal earnings last quarter. This will take 1HFY23 earnings to PkR4.4bn (EPS: PkR56.1), dropping drastically compared to earnings of PkR10.2bn (EPS: PkR129.5) in 1HFY22. We expect revenue for the quarter to clock in at PkR49.9bn, up by 34%QoQ on the back of higher effective prices along with higher volumetric offtakes with 9,439 units sold, up by 7%QoQ compared to 8,848 units sold in the previous quarter.

Moreover, gross margins are likely to recover into the positive territory once again after the deep dive suffered last quarter (-6.3%), and are likely to post at 3.1% in 2QFY23. Other Income is expected to once again provide respite to earnings, clocking in at PkR4.2bn (PkR53.8/sh) although down by 18%QoQ owing to the drop in ST Investments reported in September outweighing the rise in interest rates. The company is expected to maintain its payout ratio at 50%, hence we foresee INDU announcing a dividend of PkR19.8/sh for the quarter, taking total payout for 1HFY23 to PkR28.0, down by 57%YoY.