Karachi, August 17, 2023 (PPI-OT): ENGRO - Lower than expected pay-out!

ENGRO just announced their 2QCY23 results, posting a consolidated EPS of PkR11.03/sh vs. LPS of PkR0.97/sh in the SPLY. On a YoY basis, the company posted a 17.98% increase in revenue, due to higher top lines posted by all group entities. Total 1HCY23 EPS came in at PkR19.12/sh (Up48.56%YoY). Further, the company has announced a PkR2.0/sh dividend for 2QCY23, taking total 1HCY23 payout to PkR42.0/sh.

Revenues increased due to higher top lines posted by EPQL (Up9.46%/28.78% QoQ/YoY), EPCL (Up5.92%QoQ/Down14.53%YoY) and FCEPL (Up7.56%/45.03% QoQ/YoY), whereas EFERT’s revenue declined by 12.77%QoQ, though up by a meagre 0.14%YoY. This resulted in ENGRO’s top line to increase by 8.03%/17.98% QoQ/YoY. The bottom line was impacted by contributions of PkR0.6bn (EFERT), PkR0.5bn (EPQL), PkR0.8bn (EPCL) and we opine impact of PkR2.2bn and PkR0.8bn from unlisted Engro Powergen Thar and Elengy propelled overall profitability.

We opine company's indirect subsidiary, Engro Powergen Thar (EPTL) to have benefited from a higher load factor during the quarter alongside upward readjustments of LIBOR and KIBOR during the period. However, further details/disclosures are awaited.

Share of profits from associates and joint venture showed a healthy rise to PkR1.7bn against a PkR0.1bn loss in 1QCY23, owing to healthy financial showing by FCEPL and major contributions from VOPAK and SECMC, in our opinion.

Finance cost stood higher at PkR11.4bn vs. PkR11.1bn (1QCY23) and PkR6.9bn (2QCY22) mainly due to exorbitant interest rates however, this benefitted the company by translating to higher other income (Up0.58%/22.32% QoQ/YoY), further fueled by healthy cash balances.

Overall, the group companies were negatively affected by high tax charges due to the imposition of supertax (having retrospective impact of 6%), however ENGRO managed to report a significantly higher bottom line (Up44.12%/562.00% QoQ/YoY) owing to above mentioned factors.