Pakistan Tobacco going high

Once again Pakistan Tobacco Company Limited (KSE: PAKT) has done a great job for the first half of this year. As per the notice to the KSE yesterday, the tobacco giant had received a massive boost to both its top line and bottom line during the six months ended June 30, 2015.
It seems that the PAKTs both factories in Jhelum and Nowshera have been very busy during the year. The firms net turnover grew by nearly 23percent to reach close to Rs25 billion in 1HCY15. Similar to last year the company saw a volumetric increase in its medium level brand, Gold Leaf and budget brands like Capstan and Gold Flake.
Even though the company saw a massive expansion in its sales, core costs remained in check. PAKT saw its cost of sales increased by nearly 12 percent but as a percentage of net sales, it declined by 936 bps to 58.38 percent. The improvement in companys performance is visible in its gross margin, which has gone up by 42 percent compare to 36 percent in year-on-year comparison.
PAKT has kept a tight control on its selling and distribution expenses. Even, though, higher sale is attributed to higher expenses and company is fighting the war of illicit tobacco in the country, it was able to decrease its expenses by 6.91 percent of net turnover, a good 735 bps lower from 1HCY14.
Due to massive increase in the companys top line and the cost control measures, PAKT improved its bottom line by 66.3 percent and closed the first half with a hefty net profit of Rs 4.7 billion which corresponds to a healthy EPS of Rs18.53.
In 2014 alone, illicit trade in cigarettes accounted for almost 23 percent of the total market in Pakistan, this translated into around 18.6 billion cigarettes. With all these issues, PAKT has performed significantly well thanks to strong supply chain and the strong feet on the ground.

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Pakistan Tobacco Co. Ltd.

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(Rs mn)                             1HCY14      1HCY15         chg

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Net turnover                        19,940      24,591      23.32%

Cost of sales                       12,843      14,356      11.78%

Gross profit                         7,098      10,235      44.20%

Selling and distribution expenses    1,487       1,699      14.26%

Administrative expenses              1,158         855     -26.19%

Other operating expenses               457         753      64.88%

Other operating income                 102          77     -24.40%

Operating profit                     4,097       7,004      70.98%

Net finance income                     113         194      72.15%

Profit before income tax             4,209       7,198      70.99%

Income tax expense                   1,362       2,461      80.70%

Profit for the period                2,848       4,737      66.34%

Gross margin                           36%         42%  up 600 bps

Operating margin                       21%         28%  up 700 bps

Net margin                             14%         19%  up 500 bps

EPS - Rs                             11.14       18.53           -

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