Result Review

Food Producers Sector

January 24, 2014
JS Global Capital Limited

EFOODS: 2013 EPS stood at Rs1.14

(2013, EPS=Rs1.14, Payout=Nil)

Engro Foods (EFOODS) announced disappointing full-year 2013 results today on the back of weak sales (-6% YoY, margin compression of ~410bp YoY and a couple of one-time charges. In 4Q alone, EFOODS booked a loss both on a reported and recurring basis primarily attributable to 1) depressed gross margin of 13% in 4Q2013, 2) losses attributable to Engro Foods Canada business and 3) charge related to sales tax during the period when FBR removed zero rating status of dairy products amounting to Rs208mn. On a consolidated basis (including Engro Foods Netherlands B.V) EFOODS posted 2013 earnings of Rs870mn (EPS of Rs1.14), down 66%YoY where losses from the Canadian business are estimated at ~Rs29mn. We estimate recurring 2013 EPS (ex the tax charge) at Rs1.17 (-65% YoY). Meanwhile note that in 4Q2013 alone, the company recorded a recurring pre-tax loss of Rs360mn (we estimate 4Q recurring LPS at Rs0.45). Meanwhile on a standalone basis, 2013 earnings stood at Rs211mn (EPS of Rs0.28), down 92%YoY where the above mentioned weakness in sales and margins was augmented by a one-time Rs673mn charge related to Canadian operation accumulated cash losses. We estimate recurring stand-alone EPS at Rs1.18 and flag 4Q reported loss per share of Rs1.34 and recurring 4Q LPS of Rs0.44. We currently have a Sell recommendation on EFOODS, with a target price of Rs76. EFOODS analyst briefing is scheduled to be on 27th Jan, 2014, which is expected to shed further light on the 2013 results.
EFOODS - Financial highlights (Rs mn) Sales COGS Gross Profit Gross Margin SGA Other Op Exp Other Inc Operating Profit Operating Margin Other exp tax Other exp Netherlands Finance cost PBT Tax PAT EPS (Rs) Source: Company announcement Consolidated 2013 37,929 29,752 8,177 22% 5,996 340 327 2,168 6% 208 785 1,174 304 870 1.14 2012 40,169 29,848 10,321 26% 5,450 430 382 4,823 12% 903 3,921 1,326 2,595 3.39 NM -13% -70% -77% -66% -66% 10% -21% -15% -55% YoY% -6% 0% -21% 2013 37,891 29,718 8,173 22% 5,984 340 324 2,174 6% 208 673 785 508 297 211 0.28 Standalone 2012 40,169 29,848 10,321 26% 5,450 430 382 4,823 12% 903 3,921 1,326 2,595 3.39 NM NM -13% -87% -78% -92% -92% 10% -21% -15% -55% YoY% -6% 0% -21%

Naveed Tehsin naveed.tehsin@js.com 92 (21) 111-574-111 Ext: 3100

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