Strong 1QFY12 earnings: APL’s 1QFY12 PAT posted at PKR1.1bn (EPS: PKR15.88), up 25% YoY and beating our expectation of PKR.1bn (EPS: PKR14.30). No payout was announced with 1QFY12 result.
Volume run up + higher margins boosted gross profit: APL’s 1QFY12 gross profit advanced 45% YoY owing to FO, HSD and MS led volumetric growth of 37% YoY. Furthermore, higher margins on deregulated products, along with estimated inventory gains of PKR60mn led to 5% YoY increase in gross profit/ton.
Other income further shored up bottom line growth: Other income, which comprises of handling income and late payment income, grew by 28% YoY, and further propped up bottom line growth. Cash/share at PKR108 during 1QFY12, though up 43% QoQ, was down 19% YoY owing to APL’s higher investment in working capital.
Maintain Buy: At last closing price, the scrip offers an upside of 34% to our Jun-12 PT of PKR550 and trades at a FY12 PER of 6x. BUY!
Volume run up + higher margins boosted gross profit
APL’s market share increased to 8.2% from 7.9%, as 1QFY12 volumes surged 37% YoY primarily due to FO, HSD and MS which jumped up 12%, 121% and 85% YoY, respectively. On the other hand, GoP’s disappearing thrust on project spending owing to scarce fund has taken a toll on asphalt volumes which were down 11% YoY during 1QFY12. However, 19% YoY growth in asphalt price amid similar increase in regional prices led APL to realize 18% YoY higher margins/ton on asphalt, thereby offsetting lower volumes. Moreover, average FO price in 1Q was up 48% YoY, paralleled by the similar increase in margins/ton. With further help from estimated inventory gains of PKR60mn, gross profit/ton rose 5% YoY.
Other income shored up bottom line growth
Other income, which comprises of handling income and late payment interest income, rose 28% YoY. Growth in other income was led by 47% surge in late payment interest income followed by handling income which surged 27% YoY amid 10% YoY increase in naphtha export. APL is dealing efficaciously with working capital needs by passing on all the increase in overdue receivables (owing to increasing FO sales) to its supplier, thus almost netting off the interest cost on overdue payable with income on overdue receivables. Cash/share at PKR108 during 1QFY12, though up 43% QoQ, was down 19% YoY due to APL’s increasing investment in stock in trade in order to feed its growing retail expansion.
Maintain Buy
We maintain our estimates for FY12, though, higher asphalt volumes during the remainder of FY12 shall remain an upside to our FY12 estimates. At last closing price, the scrip offers an upside of 34% to our Jun-12 PT of PKR550 and trades at a FY12 PER of 6x. BUY!
Economic & Political News
State Bank seeks investment details of financial institutions
The State Bank of Pakistan directed all the financial institutions to report portfolio of their investment in the public and private sectors.
October current account deficit at USD220mn
Current account deficit stood at a provisional USD220mn in October, compared with a deficit of USD1.03bn in the previous month, the central bank said. For the July-October period, the deficit stood at a provisional USD1.56bn, compared with USD54mn in the same period last year, according to data from the State Bank of Pakistan.
Analyst Certification:
The research analyst(s) denoted AC on the cover of this report, primarily involved in the preparation of this report, certifies that (1) the views expressed in this report accurately reflect his/her personal views about all of the subject companies/securities and (2) no part of his/her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.
Disclaimer
The report has been prepared by Elixir Securities Pakistan (Pvt.) Ltd and is for information purpose only. The information and opinions contained herein have been compiled or arrived at based upon information obtained from sources, believed to be reliable and in good faith. Such information has not been independently verified and no guaranty, representation or warranty, expressed or implied is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. Descriptions of any company or companies or their securities mentioned herein are not intended to be complete and this document is not, and should not be construed as, an offer, or solicitation of an offer, to buy or sell any securities or other financial instruments.
Research Dissemination Policy
Elixir Securities Pakistan (Pvt.) Ltd. endeavors to make all reasonable efforts to disseminate research to all eligible clients in a timely manner through either physical or electronic distribution such as mail, fax and/or email. Nevertheless, not all clients may receive the material at the same time.
Company Specific Disclosures
Elixir Securities Pakistan (Pvt.) Ltd. may, to the extent permissible by applicable law or regulation, use the above material, conclusions, research or analysis in which they are based before the material is disseminated to their customers. Elixir Securities Pakistan (Pvt.) Ltd., their respective directors, officers, representatives, employees and/or related persons may have a long or short position in any of the securities or other financial instruments mentioned or issuers described herein at any time and may make a purchase and/or sale, or offer to make a purchase and/or sale of any such securities or other financial instruments from time to time in the open market or otherwise. Elixir Securities Pakistan (Pvt.) Ltd. may make markets in securities or other financial instruments described in this publication, in securities of issuers described herein or in securities underlying or related to such securities. Elixir Securities Pakistan (Pvt.) Ltd. may have recently underwritten the securities of an issuer mentioned herein.
Other Important Disclosures
Foreign currency denominated securities is subject to exchange rate fluctuations which could have an adverse effect on their value or price, or the income derived from them. In addition, investors in securities such as ADRs, the values of which are influenced by foreign currencies effectively assume currency risk. Foreign currency denominated securities is subject to exchange rate fluctuations which could have an adverse effect on their value or price, or the income derived from them. In addition, investors in securities such as ADRs, the values of which are influenced by foreign currencies effectively assume currency risk.
Contributed By
