EUR 8.28 For Business Accounts Only

EFERT: Enticing numbers may not hold, (AKD Daily, Mar 20, 2020)

AKD Daily

EFERT: Enticing numbers may not hold

  • Following the broader market sentiment driven by COVID’19, EFERT has shed 22.5% CYTD. This steep price correction has resulted in the scrip offering highest dividend yield in AKD Universe (CY20F D/Y: 21.9%) at last close.
  • While our current TP (PkR75.2/sh) entails a Buy stance, however, if EFERT reduces its urea price at par with FFC, our new earnings for CY20-22F would decline by 32% or PkR3.84/sh on average. Our bear case would entail revised D/Y of 14.6% in CY20F, implying total return of –5.1%, with TP at PkR44.0/sh. Therefore, we advise investors to remain cautious until clarity on pricing emerges.
  • To add to the potential downside risks, cheaper LNG may result in hitherto closed fertilizer plants to resume operations. Urea surplus situation may put pressure on EFERT’s higher than peer urea prices.
  • Meanwhile, news reports suggest that EFERT has put forth a proposal to GoP, demanding alignment of pricing of entire gas supply for its base plant to industry levels (vs. current petroleum pricing for ~10% of total gas consumption) in exchange for further urea price reduction.
  • Materialization of the aforementioned proposal may soften the blow of further reduction in prices for EFERT, providing a glimmer of hope in otherwise less than encouraging investment case.

AKD Research

AKD Securities Limited
AKD Securities Limited

AKD Securities Ltd. is one of the leading securities firm in Pakistan, providing a comprehensive range of investor focused services, including equity brokerage, economic and securities research, investment banking and financial advisory services. AKD Securities accounts for more than 6% of the average daily value of the Karachi Stock Exchange. AKD Securities was the first brokerage house to launch an online trading platform in Pakistan in November 2002 and now has the largest market share with over 6000 customers. This has helped diversify and expand the retail investor base in the country and ushered in a whole new universe of investors to the stock market.

AKD Securities Ltd. caters to a diversified group of domestic and international institutional investors, high net worth individuals and upscale retail clients, including expatriate Pakistanis. With high quality research, unparalleled execution and distribution capability for both regular and large block trades, AKD Securities Ltd. has earned an outstanding reputation in the Pakistani securities industry.Outside of commercial banks, AKD Securities Ltd. is one of the biggest capital market firms in the country. AKD Securities is the leader in raising and providing risk capital in underwriting, market making and mergers and acquisitions in Pakistan. Good corporate governance and professionalism are emphasized throughout the firm and AKD Securities Ltd. is amongst the very few companies to have introduced a firm-wide comprehensive CODE of ETHICS, overseen by an independent compliance manager.Ultimately, our success is based on the quality of service we provide to our customers and the trust and confidence reposed in us by them. Our focus, therefore, remains on customer satisfaction at all levels in the company.

Ailia Naeem

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