Engro Corporation’s (ENGRO) earnings came in
below analyst expectations for 1H2011 on account of
financial charges relating to its new fertilizer plant
being expensed out. ENGRO’s reported earnings in
1H2011 stood flat at Rs8.6/share (PAT: Rs3,381mn).
While ENGRO’s fertilizer, power and foods
businesses reported impressive earnings during the
period, lower profits from Engro Eximp (one off trading gains
made last year) and Engro Vopak kept earnings under check.
ENGRO also announced a first interim cash dividend of
Rs2/share. Post this result; we have tweaked our
assumptions leading to a downward revision in our full year
earnings by 19-23% for 2011-2012. The stock currently trades
at 2011E and 2012F PEs of 6.9x and 4.5x respectively. We
maintain our ‘Buy’ call with a revised target price of Rs231.
Recommendation: ‘Buy’ maintained
As the result came below our expectation, we have tweaked
our assumptions leading to a downward revision in our
earnings estimates. We now expect the company to report
2011E EPS of Rs19.97 from Rs25.79 expected earlier.
However, keeping in view its expansion plans for the foods
business and the new fertilizer plant coming online, we still
remain bullish on Engro with a revised target price of Rs231
(potential upside of 67%). Nonetheless, we highlight gas
curtailment as a key concern for the company.