Karachi: Engro Corporation Limited (ENGRO) hosted its analyst briefing today, detailing the financial outcomes for the first half of calendar year 2024 (1HCY24) and discussing future corporate strategies. Despite a notable 42% year-on-year decline in consolidated earnings, driven primarily by lower income from now-discontinued thermal assets, the company sees areas of robust growth within its continuing operations.
According to AKD Securities Limited, ENGRO’s consolidated earnings fell to PkR6.3 billion from PkR10.8 billion in the same period last year, largely due to diminished returns from thermal operations which include EPQL, EPTL, and SECMC. However, profits from ongoing business activities surged by 83% year-on-year to PkR5.0 billion. Standalone profits also increased by 50% to PkR14.2 billion, buoyed by higher dividends from its fertilizer business and effective cost optimizations.
The management expects to finalize the divestiture of its thermal assets by the first quarter of 2025, pending approval from stakeholders, including Chinese lenders. The company also highlighted significant gains in its fertilizer segment, particularly EFERT, which saw profitability jump by 73% to PkR9.4 billion, driven by higher sales volumes of DAP and specialty fertilizers.
Conversely, the polymer segment, represented by EPCL, faced a loss of PkR1.6 billion amid global commodity price declines and subdued domestic construction activities. Despite current pressures, management remains optimistic about a potential recovery in the construction sector which could revive polymer business fortunes.
Engro’s LNG and chemical handling operations reported strong performance, with a 56% increase in handling volumes and sustained profitability due to dollar-denominated earnings. The LNG terminal managed 36 cargoes with over 97% availability.
Engro Enfrashare expanded its tower footprint by 12% to 4,063 towers, capturing 52% of the ITC market share, although it continues to operate at a net loss due to higher interest rates.
The briefing also covered the ongoing performance of discontinued thermal operations, which remain profitable due to efficient plant operations and increased interest income. Additionally, Engro’s international arm, EXIMP FZE, reported a 25% increase in volumes, with plans to expand further in global markets.
Overall, despite some challenges, Engro maintains a ‘BUY’ stance with a target price of PkR409 per share by June 2025, promising a capital upside of 25% alongside a robust CY24 dividend yield of 11%.