Engro Corporation’s analyst briefing takeaways

Engro Corporation held its analyst briefing on Friday to discuss its 2011 financial result. The company posted earnings of Rs8.1bn (EPS: Rs20.50) compared to a profit after tax of Rs6.8bn (EPS: Rs17.27) in 2010, up 19%YoY. Engro Fertilizers, Engro Foods, Engro Powergen and Engro Vopak were the major growth drivers as these subsidiaries recorded profits of Rs4.6bn, Rs0.9bn, Rs1.7bn and Rs3.5bn, respectively. However, losses posted by Engro Polymer and Avanceon resulted in a profitability drag during the period. One of the key takeaways from the analyst briefing was the urea price hike of Rs549/bag that was attributable to offset production losses due to 198 days of gas related shutdowns. Although the management is continuously looking for alternate gas supply solution to their Enven plant, there has not been any concrete development on the issue. As the likelihood of the resumption of gas supply on continuous basis to SNGPL based plants seems dim, the urea prices may not come down and exorbitant margins enjoyed by other urea plants like FFC and FFBL will continue. Consequently, we have an ‘Overweight’ stance on the sector.

After tax profits (Rsmn)
2011 2010
Engro Fertilizers 4,588 3,730
Engro Foods 891 176
Engro Polymer -706 -770
Engro Powergen 1,718 1,100
Engro Eimp 858 1,734
Engro Vopak 3,484 1,109
Avanceon -169 -196
EngroCorp.(Cons.) 8,060 6,790
EPS(Rs) 20.5 17.27
Source: Company presentation

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