HTL – all drivers in growth mode

After slower couple of years, Hi-Tech Lubricants Limited (PSX: HTL) is seeing demand returning. This is reflecting in the company’s financial performance for FY21 where after remaining under duress in FY19 and somewhat in FY20, consolidated profits for HTL increase by over 5 times during FY21. On the unconsolidated side, earnings turned green from crimson.

FY21 has all the growth drivers necessary for HTL to spur its consolidated revenues, which were seen climbing by 88 percent year-on-year. These drivers of growth pushed sales from both the lubricant segment and the petroleum segment. In the lubricants segment, it was a mix of external demand for lubricants and company’s own operational efficiency. The group’s wholly owned subsidiary – Hi-Tech Blending (Private) Limited - the blending plant - played a key role with significant volumetric growth expected in high double digits, which propelled the group’s profitability. The blending plant has been involved in the local blending of its in-house lubricants under the brand name ZIC, and during 9MFY21 witnessed over 90 percent rise in volumes.

In the petroleum segment, the growth drivers for revenue growth were the factors that spurred volumetric sales of retail fuels like petrol and diesel such as resumption of economic activity, increased trade, higher agriculture activity, curb on illegal trade of fuel, and increased automobile sales - as well as improvement in prices. However, despite a massive growth in gross profits for FY21, HTL saw its gross margins drop from 25.1 percent in FY20 to 21.4 percent in FY21, which according to a research note by AHL was likely due to higher discounts offered to attract new customers and increase market share in the highly competitive mid-tier and low-tier market segments. With a 51 percent decline in finance cost, the consolidated earnings stood at Rs651 million.

The current dynamics and expansion plans point towards HTL’s growth prospects. The results of blending plant are phenomenal, and the group has presented its intention to further expand its blending facilities with additional blow molding machines, storage tanks and filling lines. Besides strong direct marketing of its brand ZIC, the company is also looking into expanding beyond borders with exports of locally blended ZIC Brand products to Afghanistan. It is also diversifying into plastic packaging industry by venturing into the production of plastic products for external customers and third parties by its wholly owned subsidiary, Hi-Tech Blending (Private) Limited (HTBL).