INSIGHT October 22, 2012
EFOODS PA
BUY
Stock price as of Target price
Current upside/(downside)
Outstanding shares (m)
Market Cap (PKRm)
Free float
3M Avg. daily turnover (PKRm)
3M Avg. daily volume (m)
12M High
12M Low
19‐Oct‐12
72.08
83.24
15%
756.20
54,507
5.2%
236.51
3.35
87.71
22.00
STOCK FUNDAMENTALS
Year end
FY11A
FY12A
FY13F FY14F
28,859
6,629
2,621
1,049
891
1.22
‐
9.63
59.08
7.48
‐
408%
6%
14%
1.30
42,878
11,225
5,350
1,091
2,504
3.24
‐
12.19
22.25
5.91
‐
181%
13%
30%
1.24
52,629
13,049
6,940
1,000
3,580
4.63
‐
16.58
15.57
4.35
‐
43%
16%
32%
0.92
in PKRm
Net sales
Gross Profit
Operating profit
Financing costs
Net Profit
EPS
DPS
BVPS
P/Ex
P/BVx
Dividend Yield %
Earnings growth %
ROA %
ROE %
Debt/Equity Price Performance ‐ 1QFY13
85
80
75
70
65
60
55
2‐Jul‐12
EFOODS
2‐Aug‐12
Rel. KSE‐100
2‐Sep‐12
Ahmed Mushtaq
ahmed.mushtaq@taurus.com.pk
Direct: +92‐21‐35216403 Ext: 202
63,477
14,998
8,721
803
4,810
6.22
‐
22.80
11.59
3.16
‐
34%
18%
32%
0.62
ENGRO FOODS Key segments limit profit growth : Analyst brief‐
ing takeaways EFOODS reported earnings of PKR 1.6bn (EPS: PKR 2.12) up by 300% YoY during 9MCY12. 3QCY12 earnings came in at PKR 601mn (EPS: PKR 0.78), increasing by 13% QoQ. Reported revenues fell QoQ as ice cream sales dipped during 3QCY12 and Dairy & Juices (D&J) revenues remained flat. Marketing and dis‐
tribution expenses fell QoQ as promotions during 3QCY12 de‐
creased. Negative growth in topline: Ice cream and D&J fail to impress: Omore’: negative seasonal impact Total revenues fell 5% QoQ (PKR 881mn vs. PKR 1,146mn‐
2QCY12) during 3QCY12 as ice cream revenues fell due to sea‐
sonal trend. Ice cream sales went down by 23% QoQ during the quarter under review. 2Q is regard to be the best quarter for ice cream sales, as Omore’ top line spiked by 180% QoQ during 2QCY12. Going forward we expect further reduction in Omore’ top line as 4Q sales also don’t exhibit positive growth due to winter season, power outages and unstable tariffs. Market share of the Ice cream brand increased to 28% (chg 1% QoQ) as per management estimates. Whereas, various pilot pro‐
jects are underway to stimulate ice cream business. Dairy & Juices: Threat of channel stuffing keeps revenues flat Dairy and Juices remained rather flat QoQ during 3QCY12 as the company delayed the provision of products to distributors to avoid channel stuffing, which could have occurred in the wake of the current price increase of Omung and Tarang. Ambient UHT market share stood at 51% as per AC Nielsen estimates. Juices CONTINUED ON PAGE 2 DISCLAIMER: The above information and advice is given in good faith, without any legal responsibility. Taurus Securities Limited or individuals connected with it may have used research material before publication and may have positions in or may be interested in the securities men‐
tioned herein. TAURUS SECURITIES LIMITED INSIGHT segment growth continued to remain on the negative side as the com‐
pany is currently in process of revising the strategy. Dairy Omung contri‐
bution to revenues increased during 3QCY12, contributing more than 15%. Olpers’ share may have dropped as percentage of total revenues, but the company plans to revitalize the brand going forward. The much advertised Omung Lassi revenues are expected to fall as the winter season approaches, with 2Q being the most lucrative of all quar‐
ters for the product. Owsum has been removed in favor of Olpers fla‐
vored milk. According to the management no new products are antici‐
pated to be released during the current year. Margins remain flat Margins of the company remained flat QoQ as D&J segment gross mar‐
gins experienced a meager rise of 1% QoQ while ice cream segment’s margins reduced by 2% QoQ. It should be noted that margins of the ice cream segment remained strong since the last two quarters (40% in 2QCY12, 38 % in 3QCY12) as compared to 23% in 1QCY12; particularly due to use of vegetable fat in place of milk and subsequent price in‐
creases. Net earnings of D&J segment increased by 46% QoQ during 3QCY12 with net margins improving to 9% during the same period as compared to 6% during the last quarter. Losses to the ice cream segment in‐
creased to PKR 110mn during 3QCY12 as compared to PKR 31mn during the last quarter as sales dipped 23% QoQ while cold chain deployment and marketing of its new brand continues. Marketing expenses fall Marketing expenses fell by 21% QoQ due to reduced advertisement of cold products like Omung Lassi and Ice cream during 3QCY12 and Rama‐
dan. Going forward the company plans to continue its “Khud Pakistan” campaign to bring all its products under one name, to reduce the mar‐
keting and promotion expenses. Farm: Seasonal decline in production, AL‐SAFA revenues breach CY11 level Production declined to 25liters/ day during 3QCY12 as compared to 29liters/day during the last quarter as calving season hampered farm output. The production should subsequently improve by November. Losses from the farm increased to PKR 30mn during 3QCY12 as com‐
CONTINUED ON PAGE 3 DISCLAIMER: The above information and advice is given in good faith, without any legal responsibility. Taurus Securities Limited or individuals connected with it may have used research material before publication and may have positions in or may be interested in the securities men‐
tioned herein. TAURUS SECURITIES LIMITED INSIGHT pared to PKR 0.5mn during 2QCY12. Al‐Safa revenues for 9MCY12 stood at USD 8mn as compared to the total revenues of USD 6.5mn during CY11. CAPEX plans may not be realized Planned CAPEX of PKR 8.7bn may not be realized this year. The com‐
pany expects to realize a commitment up to PKR 7bn during CY12. In order to procure the powder plant, LC has been opened while the first installment of this commitment has already been paid. The plant is ex‐
pected to arrive by Jan’13 and to be commissioned by Mid CY13. DISCLAIMER: The above information and advice is given in good faith, without any legal responsibility. Taurus Securities Limited or individuals connected with it may have used research material before publication and may have positions in or may be interested in the securities men‐
tioned herein.