46% YoY surge in PAT: Dawood Hercules & Chemicals Limited (DAWH) posted PAT of PKR519mn (EPS: PKR1.08) in 1QCY11, up 46% YoY from PKR356mn (EPS: PKR0.74) in 1QCY10. Earnings growth primarily emanated from higher gross margins and significant jump in profit from associate.
800bps jump in gross margins; 123% YoY increase in share of profit from associate: Despite 22% plunge in top-line due to 42% decline in volumetric sales, gross profit rose by 5% YoY to PKR335mn mainly attributable to 800bps jump in gross margins to 31%. Moreover, bottom-line growth was further helped by 123% YoY increase in profit from associate to PKR909mn.
Impairment loss partially offset strong income from associates: DAWH booked an impairment loss of PKR349mn on its ‘available for sale’ investments in SNGP and SEPCO during the quarter, which partly offset the gains from higher gross margins and profit from associate.
Investment Perspective: At yesterday’s closing price of PKR63.5/share, the scrip is trading at a marginal 1% premium to its portfolio value (PKR63/share).
800bps jump in gross margins; 123% YoY increase in share of profit from associate
Despite a strong increase in Urea prices (37% YoY) to an average of PKR1,113 during 1QCY11, top-line for DAWH plunged by 22% YoY mainly on the back of 42% YoY decline in Urea dispatches to 51.9k tons due to gas curtailment and resulting plant shutdowns. However, gross profit still increased by 5% YoY to PKR335mn during 1QCY11 as against PKR321mn last year, primarily stemming from 800bps jump in gross margins to 31%. Moreover, share of profit from associate increased by more than two folds to PKR909mn on its 38% (150mn shares) holding of Engro Corporation Limited, a major contributor to 1QCY11 bottom line.
Impairment loss partially offset strong income from associates
Poor financial performance of SNGP and SEPCO, which are present in DAWH’s investment portfolio, and the resulting dismal share price performance of the two scrips led DAWH to book an impairment loss of PKR349mn during 1QCY11, which partly eroded the gains stemming from strong gross margins and associate’s profits.
Investment Perspective
At yesterday’s closing price of PKR63.5/share, the scrip is trading at a marginal 1% premium to its portfolio value (PKR63/share) at current market prices.
Economic & Political News
Numbers on CNICs to be treated as NTNs
Federal Board of Revenue Chairman Salman Siddiq said on Wednesday that the Computerised National Identity Card Numbers (CNICs) would become National Tax Numbers (NTNs) of the existing and new taxpayers from December 31, 2011. From December 2011, the FBR has decided that the NTN number would be the same which has been mentioned on the CNICs. Thus, the CNICs would become the NTNs – identification number of taxpayers
Petrol production halved
The country’s petrol production witnessed a decline of 61 percent after 2 of the 5 oil refineries shut down operations because of technical and cash-flow problems, industry officials said on Wednesday. National Refinery Limited (NRL) is running on a low throughput for the last few months. It is producing just 400tons/day. Attock Refinery Limited (ARL), which adds close to 1,000tons of petrol to the national supply, is going through a planned shutdown as part of the annual maintenance needed to keep the plant and machinery running. Pakistan’s daily consumption of petrol stands at around 6,667tons/day against the existing supply of just 2,600tons.
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