Results first take: FY22 earnings results below expectation
Results first take
- FY22 earnings results below market expectation due to a lower gross profit margin
- Net profit decreased 20.6% yoy to HKD572mn due to distortion from the one-off gain on disposal of property, plant, and equipment recognized last year
- Exclude the one-off gain in FY21, net profit decreased 7.9% yoy.
- Revenue increased 12.7% yoy to HKD6,066mn, increase of average sales price by 9.6%.
- Gross profit margin dropped to 12.8% versus 16.0% last year same period due to the significant increase in coal and yarn price during the period
- The average selling price increased 9.6% but was not enough to offset the rising raw material prices.
- PT proposed an final dividend of HK$14 cents per share with a 85% payout ratio (2HFY21: HK$22 cents)
Our view
- The major miss came from the worse-than-expected GP margin and it will be negative on the share price (-ve)
- We expect the GP margin will gradually improve in the next couple of years as the average selling price hikes slowly offset the rising raw material prices.
- We expect margin pressures to ease as the raw material price hikes slow down.
- Although PT share price is under pressure by a worse-than-expected GP margin, it still offers an attractive and sustainable dividend yield of 10%+.
- The stock, at c.7x PE, trades substantially below industry bellwether Shenzhou (2313 HK) >35x PE.
- Currently, recommend BUY with TP under review