Descon Oxychemicals: Upbeat downstream demand lift earnings

April 22, 2021

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Descon Oxychem Limited (DOL) announced its 3QFY21 financial results today, where it reported Net Profit of PKR 131Mn (EPS: PKR 0.75), up 3/44% YoY/QoQ, taking total profitability during 9MFY21 to PKR 236Mn, down 13% YoY. Reason behind better profitability during 3QFY21 was on account of improved demand of Hydrogen
Peroxide which the company was able to capitalize on due to capacity expansion in 1HFY21. Hydrogen
Peroxide is being used in Sanitizers which are witnessing a huge demand currently.

Key highlights of the result are summarized below:
▪ Net revenue expanded by 11% YoY to PKR 793Mn in 3QFY21, taking 9MFY21 topline to PKR 2.1Bn (↑ 2% YoY). This was on account of robust demand from textile
sector and new agreements with food businesses.
▪ On the other hand, gross margin witnessed a meagre attrition of 1.0ppts YoY to
stand at 32% in 3QFY21. Similarly, gross margin declined by 5ppts to 24% during
9MFY21. This is primarily attributable to higher RLNG cost following the uptick in oil
prices during the period. Moreover, additional depreciation recorded on new capacity which came online during 1HFY21 also kept the gross margins in check.
▪ Finance costs jumped by 2.0x times to PKR 19Mn during 3QFY21 due to increased
debt to finance the capacity expansion project.
▪ On the other hand, other income also improved by 17% YoY to PKR 6Mn during the
period.

(PKR Million)	9MFY21	9MFY20	YoY%
Net Revenue	2,119	2,087	2%
Cost of Sales	(1,615)	(1,487)	9%
Gross Profit	504	600	-16%
Gross Margin	24%	29%
SG&A	(107)	(116)	-8%
Other expenses	(33)	(31)	7%
Other income	12	9	32%
EBIT	376	462	-19%
Finance cost	(40)	(77)	-48%
PBT	335	385	-13%
Tax	(100)	(115)	-14%
PAT	236	270	-13%
EPS	1.35	1.54