Engro Polymer’s (EPCL) profit drops 40% , but the stock skyrockets

Key takeaways

• Engro Polymer & Chemicals Ltd. (EPCL) posted 4QCY24 earnings of PKR 2.1bn (EPS: PKR 2.3), reflecting a 40% YoY decline but a strong sequential recovery.
• Revenue increased 11% YoY to PKR 21.3bn, driven by higher PVC offtakes despite lower product prices.
• Gross margins shrank to 14.1% from 26.9% YoY, mainly due to higher energy costs, with gas prices increasing 45% YoY.
• The company reported an annual loss of PKR 161mn (LPS: PKR 0.4) due to rising costs and weaker core margins.
• AKD Securities maintains a ‘SELL’ stance on EPCL, citing persistent margin pressure and high energy costs.

Engro Polymer & Chemicals Ltd. (EPCL) released its 4QCY24 financial results, showing a mixed performance. While the company managed to recover from a PKR 2bn loss in 3QCY24, its 40% YoY earnings decline signals underlying challenges. This blog post breaks down EPCL’s financials, exploring the factors impacting its profitability and outlook.

Revenue growth amidst pricing pressure

EPCL’s revenue increased by 11% YoY to PKR 21.3bn, supported by stronger PVC sales volumes. However, lower product prices offset some of this gain. On a sequential basis, revenue saw a 6% increase over 3QCY24, indicating a recovery from the previous quarter’s weak performance.

Gross margins hit by rising energy costs

Despite improved revenues, EPCL’s gross margins contracted to 14.1% from 26.9% in 4QCY23. This decline was primarily driven by a sharp increase in gas prices, which rose 45% YoY for captive power and 15% YoY for process gas. Higher energy costs remain a key concern for the company, as they directly impact production expenses and profitability.

Operating and financial costs weigh on profits

Operating expenses declined 51% YoY, mainly due to a high base effect from one-off adjustments in 4QCY23. However, finance costs surged by 7.1x YoY to PKR 1.8bn, reflecting increased debt levels and the absence of a one-off reversal recorded in the previous year.

Full-Year performance: a significant decline

For CY24, EPCL reported a net loss of PKR 161mn (LPS: PKR 0.4) compared to a profit of PKR 8.9bn (EPS: PKR 9.1) in CY23. This drastic drop in earnings was largely due to rising energy costs, weaker PVC core margins, and higher financing expenses. The company also failed to declare any dividends, marking a sharp contrast to the PKR 6 per share payout in CY23.

Future outlook and investment stance

EPCL continues to face profitability pressures due to elevated input costs and margin compression. Despite sequential improvement in 4QCY24, AKD Securities maintains a ‘SELL’ stance on the stock, citing concerns over sustained high energy prices and a weak pricing environment.

The research firm has set a December 2025 target price of PKR 30 per share, indicating limited upside potential given current market conditions. Investors should closely monitor energy cost trends and PVC pricing dynamics before making investment decisions.

EPCL’s 4QCY24 results show signs of recovery, but long-term challenges persist. The company remains vulnerable to high input costs and margin volatility, raising concerns about sustained profitability. While revenue growth and sequential improvements provide optimism, investors must weigh these against rising expenses and a tough operating environment. Given these factors, caution is warranted in EPCL’s stock outlook.

What are the analysts saying?

According to our database, EPCL has an average analyst price target for Dec 2025 of Rs. 31 based on estimates of 5 different analysts. This includes the highest price target of Rs. 37 by JS Global Securities and the lowest price target of Rs. 25 by Foundation Securities.

The average analyst price target of Rs. 31 implies a downside of 15.7% from here on.

Here is how different research firms have set their target prices for Dec 2025: