Tri-Pack Films CY2009 earnings preview
Tri-Pack Films Limited (TRIPF) is scheduled to unveil earnings for CY2009
tomorrow. We expect the Company to earn profit after tax of PKR 396 million
(EPS: PKR 13.19) for CY2009 as compared to PKR 480 million (EPS: PKR 16.0)
last year, projecting YoY drop of 18%. 16% YoY decline in selling price and more
than twice increase in finance cost will likely to drag the bottom line by 18%.
We expect the Company to declare cash dividend of PKR 10 per share.
Profit & Loss Account (PKR million) CY2009E CY2008A YOY Chg
Net sales 5 ,445 5 ,865 -7%
Cost of sales 4 ,409 4 ,855 -9%
Gross profit 1 ,037 1 ,010 3%
Operating profit 8 25 8 46 -3%
Finance cost 2 29 1 09 111%
Profit before taxation 5 98 7 24 -17%
Profit after taxation 3 96 4 80 -18%
Earnings per share (PKR) 1 3.19 1 6.00 -18%
Gross margin 19% 17%
Operating margin 15% 14%
Net profit margin 7% 8%
Volumetric sales (tons) 3 0,587 2 7,598 11%
Sources: Company financials & AHL estimates
Top line of the Company is expected to drop to PKR 5.4 billion during CY2009
as compared to PKR 5.9 billion in CY2008, with an expected YOY decline of
7%. Although the Company will likely to achieve volumetric growth of 11%,
however an average YoY decline of 16% in film prices is likely to eat away the
benefits of volumetric growth.
Cost of sales is likely to drop by 9% during the year to PKR 4.4 billion as
compared to PKR 4.9 billion in CY2008, mainly on account of declining trend
in the polypropylene prices in the international market, which led to the
margin expansion by 200bps at primary level.
Finance cost is likely to swell to PKR 229 million during the year as against
PKR 109 million a year back, with an expected YoY increase of 111%, mainly
on the back of higher working capital requirements.
Our Discounted Cash Flow (DCF) based target price for the scrip works out to
PKR 171 per share. At current price level the scrip is available at a discount of
39% to its target value coupled with attractive CY2010E PE and dividend yield of
6.9 and 12.4%, respectively, thus we recommend buy on the scrip.