Ittehad Chemicals Limted (ICL) - June 2023

Ittehad Chemicals Limted (ICL) – June 2023

Research Team

Table of Contents

Corporate Briefing Notes

Ittehad Chemicals Limted (ICL) held its corporate briefing session to discuss the financial results for 9MFY23 and its future roadmap.

Key Highlights

● To recall, the Company achieved a substantial growth of 69% YoY in net sales during 9MFY23, reaching at PKR18bn compared PKR11bn in the previous year. Similarly, notable improvement also witnessed in the gross profit margin, increasing from 13% to 20% compared to the SPLY. This improvement is primarily attributed to the increased exports of the Company’s products in the international market.
● Moreover, the bottom line reflected a significant net profit after tax of PKR1.3bn (EPS: PKR13.22/sh) in 9MFY23, compared to PKR374mn (EPS: PKR3.74/sh) in SPLY.
● Production of caustic soda down by 7% YoY to 70K MT during the noted period vs 75K MT in SPLY. The decline in production is due to less demand from textile sector.
● On the other hand, production of LABSA increased by 29% YoY in 9MFY23, reaching at 20K MT as against 15K MT during the corresponding period. The significant increase in production played a key role in driving sales growth for the company.
● The company successfully achieved the CoD of LABSA/SLES Phase-2 in 2022 that has substantially increased the segment’s total capacity from 24K MT to 70K MT, respectively.
● LABSA prices hovers at USD1650/MT, while LAB prices are trading at USD1850/MT. To note, LABSA prices have come down from USD2850/MT since Oct’22.
● Current domestic price of Caustic soda is PKR140K/MT.
● To enhance fuel and operational efficiency, ICL is currently working on upgrading their power plant engines, despite initial delays caused by LC issues.
● During the period, the capacity utilization of calcium chloride remained at approximately 80-85%. The management highlighted that the prices of calcium chloride experienced a decline to PKR37-40K from June 2022. However, there has been a gradual recovery in prices, and they are expected to continue their upward trajectory. Calcium chloride is primarily exported to Middle Eastern countries for oil exploration purposes. The average export price of Calcium chloride during the period clocked in at PKR70K/MT.
● The company’s current average electricity tariff stands at PKR28/unit. However, the management is actively exploring strategies to mitigate the impact once the company is subjected to the regular price of PKR37 per unit. They are assessing potential avenues to effectively pass on the cost impact resulting from the increased electricity tariff.

Future Outlook

● Going-forward, the Company foresees continued pressures on its bottom-line due to elevated energy costs, freight costs, PKR devaluation, and rising interest rates. To mitigate these challenges, the Company is exploring additional export opportunities in Central Asia within the Calcium chloride segment, aiming to improve profitability through market diversification.

Important Disclosures


This report has been prepared by Chase Securities Pakistan (Private) Limited and is provided for information purposes only. Under no circumstances, this is to be used or considered as an offer to sell or solicitation or any offer to buy. While reasonable care has been taken to ensure that the information contained in this report is not untrue or misleading at the time of its publication, Chase Securities makes no representation as to its accuracy or completeness and it should not be relied upon as such. From time to time, Chase Securities and/or any of its officers or directors may, as permitted by applicable laws, have a position, or otherwise be interested in any transaction, in any securities directly or indirectly subject of this report Chase Securities as a firm may have business relationships, including investment banking relationships with the companies referred to in this report This report is provided only for the information of professional advisers who are expected to make their own investment decisions without undue reliance on this report and Chase Securities accepts no responsibility whatsoever for any direct or indirect consequential loss arising from any use of this report or its contents At the same time, it should be noted that investments in capital markets are also subject to market risks This report may not be reproduced, distributed or published by any recipient for any purpose.

Analyst certification:

The research analyst for this report certifies that 1.all of the views expressed in this report accurately reflect her personal views about the subject and 2.no part of any of the research analyst’s compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst in this report.

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