Engro stands among the fallen ‘lucrative’ blue chips

KARACHI: The recent 13 per cent dip of the stock market from its April 15 peak of 10,677 points has seen many of the blue-chip companies’ stocks slide down.

Engro, one such blue-chip companies, has lost almost 20 per cent during the period.

“The underperformance of the company’s stock is mainly attributed to heavy foreign selling,” said JS Global Capital analyst Bilal Qamar in his research report.

Selling has been witnessed in the regional stock markets after the emergence of the  Greece debt crisis, with Engro also following the flow at the local bourse.

“Engro offers an increase of 41 per cent in stock price to an estimated price of Rs235 per share,” said the analyst.

There are also no major budgetary concerns for the fertiliser or food business, the key areas of Engro operations.

“However, ongoing gas curtailment issue and cost overruns on expansions remain the key risks to the valuation,” the analyst added.

Only Oil and Gas Development Company Limited (OGDCL), Unilever and Nestle among the blue-chip stocks have remained resilient because of the high degree of foreign interest.

Key Engro expansion

Qadirpur power plant, which was commissioned at the start of the year, has in a short span of less than a month contributed 2.4 per cent to Engro Corporation’s profits.

A new urea plant is expected to come on stream in the third quarter of the current year.

The food business has continued to progress well and after achieving profitability in the dairy segment, Engro is aggressively marketing its ice cream business with strong results expected during the current summer season.

Moreover, packaged juices are expected to be brought into the market, in the current month.

Expansions in the rice processing and trading business are also on track, with the rice processing plant likely to be operational by November 2010.

Published in the Express Tribune, June 3^rd, 2010.