Karachi, October 25, 2022 (PPI-OT): OGDC, DGKC and CHCC: 1QFY23F Result Previews

OGDC to report earnings of PkR 10.30/sh for 1QFY23: Oil and Gas Development Company Limited (OGDC) is scheduled to release its 1QFY23 earnings later today, wherein we expect the company to post NPAT of PkR44,288mn (EPS PkR10.30), higher by 1.04xQoQ and 32%YoY. The earnings growth is expected to be driven by a 19%QoQ increase in OGDC’s topline, expected to clock in at PkR113,295mn for the three-month period. The topline growth is attributable to the weaker PkR against the US$, which was offset to some extent by lower average crude oil prices during the quarter when compared to the previous period, and lower production levels.

To recall, the exchange rate averaged PkR221/US$ in 1QFY23, compared to PkR194/US$ in the previous quarter. Other income is expected to clock in at PkR19,441mn for the quarter, higher by 14%QoQ, with the growth attributable to exchange gains for the period. Exploration expenses for the quarter are estimated at PkR3,181mn, lower by 46%QoQ, due to the absence of any substantial dry well cost realized during the period. Alongside the earnings, we expect the company to announce a cash dividend of PkR2.00/sh. We have a Buy rating on the stock, with a Jun’23 TP of PkR152/sh, representing an upside potential of 107% over the last close.

DGKC – earnings to clock in at PkR1.68/sh in 1QFY23F: DGKC is slated to announce its 1QFY23 result today, where we expect the company to record an unconsolidated nominal profit of PkR0.74bn (EPS: PkR1.68) vs NPAT of PkR0.91bn (EPS: PkR2.07) in 1QFY22. For 1QFY23, the top line is expected to increase 6/40% QoQ/YoY as the higher retention prices offset the decline in offtakes (cement dispatches are likely to decline 15.3%QoQ). Likewise, gross margins are likely to clock in at 17.9% vs 15.3% in 4QFY22. Dividend income from MCB, NML, and NCL is likely to result in a gain of PkR0.6bn which will help bolster the company’s bottom line. Furthermore, the higher finance cost (+15%QoQ) is likely to keep the pressure on the bottom line. Moreover, we don’t expect DGKC to announce any payout in the upcoming financial result. The company currently trades at FY23 P/E of 7.6x with our SOTP-based TP of PkR85/sh providing an upside of 43% from the last close.

CHCC – earnings to clock in at PkR6.4/sh in 1QFY23F: CHCC is slated to announce its 1QFY23 result on 26th Oct’22, where we expect the company to record an unconsolidated nominal profit of PkR1.24bn (EPS: PkR6.4) vs NPAT of PkR1.02bn (EPS: PkR5.2) in 4QFY22. For 1QFY23, the top line is expected to increase by 27%YoY and decline 4.6%QoQ as the higher retention prices offset the decline in offtakes (CHCC cement sales to see a decline of 18.5%QoQ). Likewise, gross margins are likely to clock in at 28.1% vs 28.5% in 4QFY22. Efficient inventory management using a mix of local and Afghan coal is likely to help the company maintain high gross margins. Furthermore, finance cost (+15.3%QoQ) is likely to keep at the elevated level as CHCC is relatively higher leveraged compared to its peers. The company currently trades at FY23 P/E of 5.2x with our TP of PkR157/sh providing an upside of 27% from the last close.