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National Refinery posts 1HFY12 results – Alfalah Securities Limited

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by January 30, 2012 Brokerage

Karachi: NRL has announced its 1HFY12 results, reporting profit after tax of PKR 1.58 billion (EPS: PKR 19.82), witnessing a drop of 49.5% YoY.

According to Alfalah Securities Limited, The gross profit depicted a drop of 36.5% to PKR 2.93 billion despite net revenues rising by 20.5% in the 1HFY12 mainly due to low refinery margins. The average crude oil prices (Opec basket) remained higher by 1.5% at USD 108.21/bbl during Jul-Dec 2011 as against USD 106.67/bbl preceding half year, where Alfalah Securities Limited believes that international crude oil would continue to remain on the higher side due to tensions between US and Iran. Since the currency is also expected to depreciate in the 2012 Alfalah Securities Limited expects NRL to report higher revenues going forward, though it may be affected due to exchanges losses. The finance cost during 1HFY12 witnessed a sharp jump 444% YoY to PKR 596 million which seems to arise from higher exchange losses.

In the 2Q FY12, NRL has recorded PKR 756 million (EPS: PKR 9.46) down by 57.5% YoY and 8.7% QoQ. The lower earnings are mainly attributed to lower margins where the gross margins dropped to 3.2% in 2QFY12 as compared to 6.7% in the same period last year and higher finance cost of PKR 400 million up by 779.5% YoY. The stock is trading FY12E PE multiple of 6.75x based on Alfalah Securities Limited’s FY12E EPS of PKR 36.44. However, due to volatile nature of the business and prevailing low margins Alfalah Securities Limited recommends a Hold on the stock.

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