Pakistan Fertilizers_Improvements to continue
Post dismal performance in CY16 on account of depressed industry dynamics, CY17 is turning out to be a good year in the making. Notable improvements include: 1) significant +26%/+20%YoY growth in total fertilizer/urea offtake during 9MCY17, 2) normalization of inventory level (urea inventory standing at 733k tons vs. 1.56mn tons in Sept'16), 3) export of urea (so far 422k tons exported till Sept'16 out of the allocated quota of 600k tons), and 4) reversal in international pricing dynamics (urea prices rebounded to US$288/ton, up 52% since low of US$190/ton in Jun'17) making room available for urea manufacturers to reduce the prevailing high level of discounts in the market (currently hovering around PkR80-100/bag), hence improving margins. Moreover, with the arrival of Rabi season (3yr avg. offtake during Oct-Dec: 1.7mn tons), improved farmer's income and subsidy support is expected to continue driving demand, in our view. In this backdrop, the fertilizer sector has posted strong price performance, recovering 15% since Aug'17. We believe the sector can continue to remain in limelight on the back of improving fundamentals and strong 4QCY17F earnings. Maintaining our Marketweight stance on the sector, FATIMA (TP of PkR45.1/sh) remains our top pick with its diversified product mix, continuous improvement in market share and concessionary gas pricing, followed by EFERT on the basis of attractive dividend yield of 11% at current levels.
Fatima Fertilizer Company Limited is a Pakistan-based fertilizer manufacturing company. The Company is engaged in manufacturing and marketing of Nitrogen, Phosphate and Potash fertilizers. It produces a range of fertilizers, including Sarsabz Calcium Ammonium Nitrate (CAN), Sarsabz Nitro Phosphate (NP), Nitrogen Phosphorous Potassium (NPK) and Sarsabz Urea. Its CAN is a granulated nitrogenous fertilizer. Sarsabz Urea can be applied in various forms and it can be spread in bulk alone or can also be mixed with other fertilizers before application. Its NP can be applied on various types of soils. The Company has a production base for Nitric Acid. The Company has annual production capacity of Urea 500,000, CAN 420,000, NP 244,000, Nitric Acid 500,000 and Ammonia 500,000. It also offers services and support to farmers from education on farming practices and research oriented agricultural practices.
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.
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