Dear Clients,
Lotte Chemical Pakistan Limited (LOTCHEM) announced its 1QCY21 results reporting profitability at PkR1,639mn (EPS of PkR1.08/sh), up by 51% Q/Q, in line with street consensus.
– The company posted a 25% Y/Y growth in revenues for the quarter amounting to PkR14.7bn from better retention rates and healthier volumes. This is attributable to a 13% Y/Y rise in regional PTA prices for the period averaging at USD733/ton.
– Primary input, Paraxylene (PX), rates for the quarter averaged at USD742/ton leading cost of sales to stand at PkR12.7bn.
– This translated to a primary delta for the quarter averaging at USD142/ton compared to USD102/ton last year. Gross margins stood at 15.4% with gross profitability residing at PkR2.3bn.
– Other expenses rose in line with better profitability. LOTCHEM recorded lower income from cash balances at PkR278mn as a result of slashed interest rates.
– Resultantly, profit after taxation of LOTCHEM stood at PkR1.6bn (EPS: PkR1.08/sh) for the quarter kicking off CY21 on a strong note.
– Our full-year assumptions for primary delta were USD90/ton (please see our report: Lotte Chemical Pakistan: Case for margin remains bleak; Time to SELL) while 1Q average has outpaced our estimates. Appreciating the steady commodity margins, our estimates are likely to witness an upside risk.
– Going forward, the resurgence of demand from the textile sector is expected to aid volumetric offtakes of PTA going into CY21.
Regards,
KASB Research
