Though market opened on positive note regarding Privatization news on Friday but fail to go on with the trend due to contradictory news regarding power tariff hike. We expect market to remain volatile owing to lack of any major triggers. While we maintain buy on dips strategy on POL, PPL, NCL, DGKC, FCCL, HUBC & PTC. PTCL – On a rising path In our today’s morning report we will discuss the result of Pakistan Telecommunication Company Limited (PTCL) for the 1HCY13 and its going forward outlook following are the details. Earnings growth the key PTCL earnings continue its ride in 2QCY13 as well, as company posted PAT of PKR 3,378 million (EPS: PKR 0.66) up by 16% QoQ versus PAT of PKR 2,916 million (EPS: PKR 0.57) in 1QCY13. For 1HCY13 earnings improved by whopping 44% YoY translating into PAT of PKR 6,294 million (EPS: PKR 1.23) versus PAT of PKR 4,368 million (EPS: PKR 0.86) on unconsolidated basis. Investors were jubilant as company announced DPS of PKR 1/-. PTC’s revenue increased by 6% QoQ, due to increase in revenue from ICH incoming minutes and from reactivation of suspended landline connections. Company’s gross margins remained stable at ~35% in 2QCy13 as per our estimates. PTC’s subsidiary Ufone didn’t announce any dividend payout as against the prior years’ dividend payment trend in the said period, consequently other income improved by 14% QoQ, to PKR 1.08 billion in 2QCy13. PKR in million 1HCY13 1HCY12 % chg 2QCY13 1QCY13 % chg Net sales 40,102 30,699 30.6 20,677 19,425 6.4 Cost of sales 26,276 23,216 13.2 13,496 12,780 5.6 Gross profit 13,826 7,483 84.8 7,181 6,645 8.1 Selling and marketing expenses 1,532 1,297 18.1 789 743 6.2 Admin Expenses 4,402 4,870 -9.6 2,284 2,117 7.9 Finance Cost 245 349 -29.8 54 190 -71.6 Other income 2,030 4,870 -58.3 1,077 953 13 Profit before taxation 9,684 6,636 45.9 5,136 4,547 12.9 Profit after taxation 6,294 4,368 44.1 3,378 2,916 15.8 EPS (PKR) 1.23 0.86 0.66 0.57 Source: Company Report, ESCAP Research Future looks bright During 3QCY13 earnings of the company would improve on back of higher monthly ICH numbers due to Ramadan/Eid and Hajj season. We believe Hajj season incremental incoming minutes to continue in Oct’13 as well. As per latest development PTA has launched a USD 27 million gray traffic monitoring system, the system went through trial phase in Aug’13. As per details PTA can curb and control the gray trafficking without physical raid at the site. We have not incorporated the incremental impact of incoming minutes, however once clarity emerges we will update the investors. On consolidated basis PTC has deleveraged its balance sheet by paying off PKR 18.5 billion loan through divestment of investments worth over PKR 30 billion. Property transfer to Etisalat, interest to acquired Warid and 3G license auction would keep the stock active. Moreover PKR depreciation would improve revenues from ICH and we remain upbeat on earnings of the company. Recommendation At current levels we continue our Buy stance on the stock with Jun’14 Target Price of PKR 30.9/share offers upside of 17%, and recommend entry on dips.
Posted on: Mon, 07 Oct 2013 03:51:37 +0000
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