Karachi, October 21, 2022 (PPI-OT): MARI and ASTL: 1QFY23 Result Previews
MARI expected to report highest-ever quarterly earnings in 1QFY23: Mari Petroleum Company Limited (MARI) is scheduled to post 1QFY23 earnings later today, wherein we expect the company to report earnings after tax of PkR12,515mn for the quarter (EPS: PkR93.81), higher by 1.23xQoQ and 38%YoY. Our expectations of bottomline growth are attributable to the healthy topline growth, whereby we estimate MARI’s net sale to grow by 23%QoQ/64%YoY to PkR33,887mn in 1QFY23, driven by a weaker PkR (Avg. Exchange Rate: 1QFY23: PkR223/US$; 4QFY22: PkR194/US$; 1QFY22: PkR164/US$). Furthermore, the revised well-head gas prices that incorporate the recent strength in crude oil prices would be applicable starting this quarter, which would likely provide further impetus to the topline.
On the costs side, a respite is expected to come in the form of lower exploration expenses during the quarter, estimated at PkR2,416mn for the quarter, compared to PkR6,413mn in the earlier quarter. To recall, PPIS’s data shows that no dry wells were encountered by MARI during the quarter in review, leading to the lower exploration expenses for the quarter. Finance income is expected to increase, to the tune of 34%QoQ/1.98xYoY, driven by exchange gains during the period. As is customary for MARI, we do not expect the company to announce a cash dividend with its 1QFY23 earnings.
ASTL – Earnings to clock in at PkR1.33/sh in 1QFY23: ASTL is slated to announce its 1QFY23 result, where we expect the company to record a nominal profit of PkR395mn (EPS: PkR1.33) vs NPAT of PkR702mn (EPS: PkR2.36) in 1QFY22. The expected earnings for the quarter primarily emanate from higher rebar prices, which offset the decline in volumetric growth where we expect the total offtake to clock in at 70K tons, down 21%QoQ. Gross margins are likely to clock in at 13.15% compared to 8.9% in 4QFY22, due to declining scrap prices (21%QoQ) and higher rebar prices.
Moreover, the decline in steel demand is likely to recover soon as was witnessed in Sep’22 cement dispatches where south offtakes were up 67%MoM. Going forward, we expect the construction demand to continue its current trajectory as the rehabilitation program is likely to propel construction demand in the southern region. Furthermore, the higher finance cost is likely to keep the pressure on the bottom line. Moreover, we don’t expect ASTL to announce any payout in the upcoming financial result. The company currently trades at FY23 P/E of 4.9x while 3-yr PEG stands at 0.4x with our TP of PkR35/sh providing an upside of 35% from the last close.