FFBL & EFERT - 1QCY21 Result Previews, (AKD Daily, Apr 15, 2021)
AKD Daily
FFBL & EFERT - 1QCY21 Result Previews,
FFBL – NPAT to post sequential decline but a turnaround on YoY basis: Fauji Fertilizer Bin Qasim Ltd (FFBL) is expected to post 1QCY21 unconsolidated NPAT of PkR1.41bn (EPS: PkR1.09), as opposed to NLAT of PkR3.05bn (LPS: PkR2.36) in the same period last year. The turnaround in earnings is expected on the back of (i) 31% YoY increase in revenue, courtesy uptrend in local DAP prices, (ii) decline in feed/ fuel gas prices, courtesy GIDC elimination leading to gross margins expected in double digit vs. -5.8% in 1QCY20, (iii) 4xYoY higher other income, courtesy dividend income from AKBL of PkR3.0/sh announced in previous quarter and, increase in cash reserves, and (iv) 48% YoY decline in finance cost amid lower interest rates. On sequential basis, the 55% decline in NPAT is expected on the back of seasonal dip in DAP offtake, with revenues expected to post a decline of 63%, despite increase in DAP and urea prices. Downside risk to earnings expectations is further impairment on its food ventures (PkR4.08bn booked in CY20). Our TP of PkR31.4/sh implies a Neutral stance at last day closing price.
EFERT – Low base leads to 7.7xYoY higher NPAT: Engro Fertilizer Ltd (EFERT) is scheduled to announce 1QCY21 financial result on 19th Apr’21, where we expect EFERT to post NPAT of PkR4.40bn (EPS: PkR3.29), up 7.7xYoY but down 34%QoQ. The sequential decline in earnings is expected majorly on the back of higher effective tax rate of 28% in 1Q as opposed to 8% in 4QCY20. On PBT basis, the earnings are expected to decline 16%QoQ on the back of absence of re-measurement gain on GIDC recorded in 4QCY20 (net impact on PBT basis: PkR0.66/sh). On YoY basis, low base of PkR571mn for NPAT in 1QCY20 leads to a phenomenal increase in earnings. To recall, GIDC elimination in 1QCY20 resulted in a gradual price decline of PkR400/bag on urea industry wide, where a lag in pass-on of the benefit hurt EFERT’s urea offtake during the aforementioned period. The revenue is expected to post 144%YoY increase, which coupled with stable gross margins, 60%YoY decline in finance cost and lower effective tax rate of 28% vs. 49% in the SPLY would translate into 7.7xYoY higher NPAT. While we have a Neutral stance on the scrip, we have not incorporated concessionary gas rates brought at par with industry rates in Jul’21, which could result in downward revision of our estimates..
AKD Research
Engro Fertilizers Limited is a Pakistan-based company, which is engaged in manufacturing, purchasing and marketing of fertilizers. The Company's brands include Engro Urea, Engro NP, Engro DAP, Zingro, Engro MOP, Engro SSP and Engro Zarkhez. Engro NP is the Company's fertilizer brand with Nitrogen and Phosphorous content in equal quantity. Engro DAP primarily contains Di-Ammonium Phosphate, and is imported by Engro EXIMP and marketed by the Company. Engro DAP is marketed in approximately 50 kilogram bags. Zingro is a micronutrient fertilizer, and is imported by Engro EXIMP and marketed by the Company. Engro Zarkhez has Nitrogen, Phosphorous and Potassium, and is primarily offered for sugar cane, fruit orchards, vegetables, potato and tobacco farming. Engro Envy is primarily offered to urban market for gardens, lawns, flower beds, fruit plants and ornamental plants. The Company is a subsidiary of Engro Corporation.
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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.
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