Karachi, October 26, 2021 (PPI-OT): ASTL and FFC: Result Previews

ASTL – Earnings to remain solid in 1QFY22: ASTL is slated to announce its 1QFY22 result (26th Oct’21), where we expect the company to record NPAT of PkR467mn (EPS: PkR1.57) vs NPAT of PkR111mn (EPS: PkR0.37) in 1QFY21. The expected earnings primarily emanate from: i) 61/6%YoY/QoQ growth in the topline largely on account of higher rebar prices (+15.4%QoQ), and ii) 21%YoY lower finance cost. Gross margin is likely to remain flat compared to YoY and QoQ basis (GM: 10.9% in 1QFY22E vs. 10.9% in 1QFY21 and 10.77% in 4QFY21), where input cost pressures coupled with higher freight cost, electricity rate hikes and PkR depreciation are key factors. Moreover, earnings are likely to see an improvement of 5.4%QoQ. The company currently trades at FY22F P/E of 6.08x while 3-yr PEG stands at 0.32x with our TP of PkR57/sh provides a capital upside of 56% from last close – Buy.

FFC – Earnings to rise by 47%YoY in 3QCY21: Fauji Fertilizer Company Ltd (FFC) is expected to announce NPAT of PkR6.79bn (EPS: PkR5.34) in 3QCY21, swelling by 87%QoQ/47%YoY. This will take 9MCY21 NPAT to PkR16.2bn (EPS: PkR12.75), up 18%YoY. The increase in earnings is majorly driven by i) higher expected offtake in Urea (+17%QoQ/+15%YoY) and ii) higher gross margin (GMs: 39% in 3QCY21 vs 34% in 3QCY20) owing to better Urea pricing in 3QCY21. The current Urea price stands at PkR1,725/bag (cumulative hike of PkR125/bag CYTD). In addition to this, the company is expected to announce third interim cash dividend of PkR4.0/sh taking cumulative payout to PkR10.1/sh for 9MCY21 owing to healthy EBITDA margin, enabling the company to maintain its historical payout ratio of 70%+, despite upcoming GIDC payments as per Supreme Court’s decision. Our TP of PkR145/sh implies an upside of 45% from last close – Buy!