elixirsecurities

a dawood group company

June09,2011

THE BELL
PAKISTAN RESEARCH

Chemicals
DAWH:Shareofprofittriggered1Qbottomlinedespiteanimpairmentloss!

DAWHPA
ClosingPrice:PKR63.5/share
Key Data 12m Price Range (PKR) Market Cap (PKR mn) Outstanding Shares (mn) Avg. Daily Volume mn (YTD)

46% YoY surge in PAT: Dawood Hercules & Chemicals Limited (DAWH) posted PAT of PKR519mn(EPS:PKR1.08)in1QCY11,up46%YoYfromPKR356mn(EPS:PKR0.74)in1QCY10. Earningsgrowthprimarilyemanatedfromhighergrossmarginsandsignificantjumpinprofit fromassociate.

75.6 39.5 30,562.6 481.3 0.2

800bpsjumpingrossmargins;123%YoYincreaseinshareofprofitfromassociate:Despite 22%plungeintoplinedueto42%declineinvolumetricsales,grossprofitroseby5%YoYto PKR335mn mainly attributable to 800bps jump in gross margins to 31%. Moreover, bottom linegrowthwasfurtherhelpedby123%YoYincreaseinprofitfromassociatetoPKR909mn. Impairment loss partially offset strong income from associates: DAWH booked an impairmentlossofPKR349mnonitsavailableforsaleinvestmentsinSNGPandSEPCOduring thequarter,whichpartlyoffsetthegainsfromhighergrossmarginsandprofitfromassociate. InvestmentPerspective:AtyesterdaysclosingpriceofPKR63.5/share,thescripistradingata marginal1%premiumtoitsportfoliovalue(PKR63/share).
Key Financials
1QCY11A 1,082 747 335 20 86 349 4 63 200 909 647 128 519 1.08

1YrRelativePerformance

(%) 170 150 130 110 90 70

1QCY10A 1,390 1,070 321 43 89 0 0 71 237 408 429 74 356 0.74

YoY (%) -22% -30% 5% -53% -3% 1628% -12% -16% 123% 51% 74% 46% 46% 1QCY11A 1,082 747 335 20 86 349 4 63 200 909 647 128 519 1.08

Outstanding shares: 481.3mn

4QCY10A 3,565 2,156 1,409 96 115 2 49 251 213 328 1,514 442 1,071 2.23 QoQ (%) -70% -65% -76% -79% -25% 14507% -93% -75% -6% 177% -57% -71% -52% -52%

DAWH

KSE-100 Index

(PKR mn) Net Sales Cost of Sales Gross Profit Distribution expenses Administrative expenses

03-May-11

17-Aug-10

08-Dec-10

23-Sep-10

29-Mar-11

13-Jul-10

21-Feb-11

28-Oct-10

08-Jun-10

14-Jan-11

07-Jun-11

Impairment loss Other expenses Other income Finance costs Share of profit from associate Profit before tax Taxation Profit after tax EPS (PKR)

Source: Elixir Research

Source: Elixir Research, Company Accounts

800bpsjumpingrossmargins;123%YoYincreaseinshareofprofitfromassociate
DespiteastrongincreaseinUreaprices(37%YoY)toanaverageofPKR1,113during1QCY11, topline 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, grossprofitstillincreasedby5%YoYtoPKR335mnduring1QCY11asagainstPKR321mnlast 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)holdingofEngroCorporationLimited,amajorcontributorto1QCY11bottomline.

UmarNaumanAC umarnauman@elixirsec.com (+9221)35694679

PleaserefertothelastpageforAnalystCertificationandotherimportantdisclosures.

THE BELL
Impairmentlosspartiallyoffsetstrongincomefromassociates
PoorfinancialperformanceofSNGPandSEPCO,whicharepresentinDAWHsinvestmentportfolio,andtheresultingdismalshareprice performance of the two scrips led DAWH to book an impairment loss of PKR349mn during 1QCY11, which partly eroded the gains stemmingfromstronggrossmarginsandassociatesprofits.

InvestmentPerspective
AtyesterdaysclosingpriceofPKR63.5/share,thescripistradingatamarginal1%premiumtoitsportfoliovalue(PKR63/share)atcurrent marketprices.
DAWH - Portfolio Value Scrip
Engro (Adjusted for Bonus) SNGP SEPCO Total equity value (PKRmn) Outstanding number of shares (mn) Portfolio value/share (PKR) No. of shares held (mn) 150 70 4 Price (PKR/share) 192.17 19.86 1.49 Value (PKRmn) 28,821 1,390 5 30,217 481.29 63

Source : Company Accounts

Economic&PoliticalNews

Research,(+9221)35694679

NumbersonCNICstobetreatedasNTNs
Federal BoardofRevenue Chairman SalmanSiddiq saidonWednesdaythat the Computerised National IdentityCardNumbers (CNICs) wouldbecomeNationalTaxNumbers(NTNs)oftheexistingandnewtaxpayersfromDecember31,2011.FromDecember2011,theFBR hasdecidedthattheNTNnumberwouldbethesamewhichhasbeenmentionedontheCNICs.Thus,theCNICswouldbecometheNTNs identificationnumberoftaxpayers

Petrolproductionhalved
Thecountryspetrolproductionwitnessedadeclineof61percentafter2ofthe5oilrefineriesshutdownoperationsbecauseoftechnical andcashflowproblems,industryofficialssaidonWednesday.NationalRefineryLimited(NRL)isrunningonalowthroughputforthelast 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. Pakistansdailyconsumptionofpetrolstandsataround6,667tons/dayagainsttheexistingsupplyofjust2,600tons

ELIXIRSECURITIES

June9,2011

THE BELL

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ELIXIRSECURITIES

June9,2011