Karachi, May 18, 2012 (PPI-OT): Engro Polymer update
Engro Polymer Chemical (EPCL) is emerging as a profitable project in CY12 wherein its complex VCM project is now a roaring success.
According to Standard Capital, through indigenous production of VCM, it produces PVC pipes (along with some bi-products) for local and export purposes and thus has a monopoly in the country in PVC supplies.
Just recently, VCM plant has started producing record sale of approx. 610tons/day as against normal level of nearly 300tons/day or above levels during CY11.
VCM plant did went under maintenance shut down on Mar’25 and then re-started its production on Apr’ 26. The indigenous production of VCM from raw material Ethylene is itself a landmark and now it gives Pakistan an edge over regional players. Now company is not subjected to fluctuation of oil prices and its impact of VCM prices.
VCM to PVC chain
As for EPCL case, VCM production has outsmarted overall need to produce PVC.
The overall consummation of VCM into PVC is not more than 400tons/day – 450tons/day, as per Standard Capital’s understanding, so excess VCM may go into inventory from where it may be exported to giant players such as in Japan. Already Standard Capital sees some VCM had been exported to Japan (earlier some of the Japanese plants shut down given Tsunami warnings).
With PVC sale diverted to local and Indian companies (given duty protection in India for EPCL) and VCM sales to far east, Standard Capital sees EPCL is coming of age and is the ‘best project’ in the whole of Engro Corp.
Profit trail to start in CY12
Standard Capital considers CY12 to be the year from where EPCL’s earnings propensity may start. EPCL has already reported recurring EPS of Re 0.10/sh (and overall EPS of Re 0.62/sh given receipt of one time insurance claim) in 1QCY12.
Standard Capital sees earnings to increase given Standard Capital’s assumed annual production of more than 120k ton per annum of PVC in CY12 against Pakistani demand of 160k tons per annum.
Soon Standard Capital will give Standard Capital’s model update. Standard Capital signals Standard Capital’s positive stance in EPCL.