01 Aug 2018 ( Lagos ) : Slightly negative-to-Neutral reaction by market expected. Although Q2 numbers did not impress, Presco shares have declined by -21% over the last one month, underperforming the broad index by around -17%. As such, analysts do not expect a significant sell-off following the Q2 earnings release. Additionally, on an annualised basis, H1 PBT currently tracks ahead of consensus’. Compared with analyst's estimates, while sales were behind by -25%, PBT was in line with analyst's N2.6bn forecast.
On a positive note, Gross margin expanded +459bp y/y to 74.6% while operating expenses declined by -21% y/y to –N1.4bn.
On a negative note, All key line items declined both on a y/y and q/q basis. The topline decline was likely driven by weaker volume sales due to increasing palm oil imports. Presco posted an effective tax rate of 39.1% in Q2 vs. 35% in the corresponding quarter of 2017. Analysts await management comments on these lines.
Analysts rate the stock Neutral.
Source : Uwadiae Osadiaye, CFA and Gregory Kronsten, Olubunmi Asaolu, Chinwe Egwim from FBNQuest Capital Limited.
Reporting for EasyKobo on Wednesday, 1 July 2018 in Lagos, Nigeria