AKD Securities Limited – Off the Analyst’s Desk (28 Sep 2023)

Karachi, September 28, 2023 (PPI-OT): INIL - Analyst Briefing Takeaways

International Industries Limited (INIL) organized its analyst briefing yesterday to apprise investors of the FY23 result and future outlook. To highlight, the company reported an unconsolidated NPAT of PkR2.27bn (EPS: PkR17.2) in FY23 vs. NPAT of PkR2.16bn (EPS: PkR16.4) in FY22. On a quarterly basis, 4QFY23 NPAT stood at PkR852mn (EPS: PkR6.5), up 29.7%QoQ. The company also announced a final cash dividend of PkR2.0/sh, taking total dividend to PkR7.5/sh in FY23.

Revenue decreased by 17.3%YoY in FY23, mainly reflecting a decline in volumes and retail prices. Domestic steel sales clocked in at 69.5K tons (down 40.4%YoY) in FY23, reflecting global, domestic and political uncertainties. Domestic polymer sales stayed relatively flat with a decrease of 3.6%YoY to 7.3K tons in FY23, reflecting a win of institutional business from SNGP and SSGC projects.

On the export sales front, a major decline was seen in Australian, American, and European markets given their governments’ contractionary policy measures undertaken to curb inflationary pressures.

For instance, in Australia an FTA was signed with India which gave the neighbouring country's products a favourable position against competitors.

Meanwhile, the imposition of domestic protectionism catering to anti-dumping measures in Canada and US has posed another reason for declining exports. The total export sales were recorded as 18.6K tons in FY23 (down 60.5%YoY). Going forward, the company is exploring new markets like GCC and Romania to recapture previously lost volumes.

The EBITDA for FY23 amounted to PkR5.2bn, reflecting a flat decline of 2.5%YoY. Despite lost volumes the company was able to maintain margins by efficiently managing costs.

To break down group performance, ISL /IIL Australia/IIL Americas/IIL CSL recorded an NPAT(LPAT) of PkR3.52bn/PkR51bn/PkR(45mn)/PkR23mn. ISL superseded its competitors in cash generated from operations, amounting to PkR22.4bn in FY23.

Going forward, the company aims to expand into new products and market segments while recalibrating sales channel management and enhancing presence into smaller urban centers. The company also intends to capture a greater market share in the value addition market and enhance its solar energy capacity in order to decrease reliance on procuring power from external sources.

In terms of risks and challenges, the company depends greatly on domestic sales which have been impacted by severe economic contraction and will continue to be affected by uncertainties encompassing the delayed elections for the ongoing year.

Moreover, interest rates and depreciating exchange rates continue to affect domestic sales where an increase of 100bps in interest rates is poised to cause a decline of PkR150mn in company profits.