TGL - Tariq Glass Industries Limited

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Apr 9, 2017
*TGL – Corporate Briefing Takeaways*

- Sales have been on the upward trend, reaching PKR 14.4bn in FY19 due to rising prices and operating level.

- Focus has been on local sales (94%), but now TGL is also looking to increase exports.

- Revenue mix consists of 50% float and 50% tableware.

- Gross margins remain around 20%.

- Raw materials are 28-30% of total cost of sales. Packaging material cost is 6-9% of COGS.

- In quantity terms, silica sand makes up 56% of total, while soda ash makes up 14%. In value terms, silica sand is just 7%, soda ash is 26% and 67% are other components.

- Fuel and power is also a major component of cost. Plant runs on LNG, which is expensive (PKR 1,600/mmbtu) as compared to local gas (limited in Punjab).

- The plant can also run on FO/LPG/Kerosene oil.

- Distribution expenses have increased due to increase in promotional activities to counter slowdown is sales.

- Company has re-entered in container business to maintain cash flows as float glass business is facing slowdown.

- Tableware efficiency by international standards is 72%, but TGL is more efficient at 80%.

- Tableware imports are meagre 5tons/day vs TGL production capacity of 150 tpd. Just higher end tableware products are imported by elite class.

- 95% of civil work is completed for float glass 2. The company would heat up the furnace by Mar-Apr 2020.

- Project cost is estimated at PKR 6.5bn out of which PKR 3.5bn is loan, while rest will be met through equity.

- PKR 3.5b loan negotiated for float glass2, out of which PKR 2.5b has been utilized. Equity financing is also under active consideration.

- Economic slowdown and higher interest rate hurting company. Finance cost would increase going forward as more loan would be utilized.

- Short term borrowings also increased due to rising inventory levels.

- Furnace life is around 5-7 years, after which the plant is reengineered to extend useful life.

- PE ratio is around 4-5x which is attractive as compared to 10x in FY17.

_IsmailIqbal Securities_