Engro Foods Limited expected to underperform: Foundation Securities

December 18, 2018 (MLN): Engro Foods Limited’s performance is expected to deteriorate due to enhanced competition and economic slowdown, it  would be difficult for the company to pass on the impact of increased raw material cost, stated a research report written by Muhammad Awais Ashraf and Usman Arif, research analysts at Foundation Securities.

Speaking with Mettis Global News, Mr. Awais Ashraf mentioned the factors responsible for the Company’s underperformance include considerable spread of loose milk, tepid urbanization and sustained weakness in supply chain.

According to the research house, benefits of company’s entry into powdered milk segment would remain subdued given difficulty in development of minor’s taste buds for the product and to attract the customers’ loyalty from existing players to them.

The report further adds that, despite of lower international prices of milk powder/palm oil, the margin of the company is not expected to improve in the near term, as the company would not be able to pass on the impact of rupee devaluation due to the aforementioned reasons.

Moreover, the silver lining for EFOODS is its frozen desserts segment. Smooth distribution on the back of infrastructure development and better electricity supply should allow growth in the segment.

As per the research report, earning per share of the company is expected to down by 60% to Rs0.95 for CY19.

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