FATIMA_1QCY17 Result Preview & Mar’17 CAD – steady deterioration
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FATIMA is expected to announce earnings for 1QCY17 today (20 Apr'17), where we expect the company to post unconsolidated NPAT of PkR2.46bn (EPS: PkR1.17) vs. NPAT of PkR1.12bn (EPS: PkR0.54) in 1QCY16, depicting an increase of 118%YoY. The improvement in earnings is expected on the back of: 1) strong 68%YoY growth in topline to PkR8.83bn reflecting 135%/44%/139%YoY expected increase in Urea/NP/CAN off-take to ~115k/435k/143k tons and 2) 2.9ptsYoY improvement in GM to 54.9% in 1QCY17 due to relatively stable product prices, lower phosphate rock prices and effective utilization of fixed cost at higher volumes. Having lost 11%CYTD, the stock currently trades at an attractive CY17F/CY18F PE of 6.6x/6.1x where our Dec'17 TP of PkR45.11/sh offers an upside of 35.8% from current price level. Moreover, the scrip also offers an attractive dividend yield of 10.7%. BUY!
Though the CA deficit reduced this month from US$822mn in Feb'17 (down 32%MoM), it remains significantly high at US$562mn in Mar'17. Despite slight increase in trade deficit (+0.85%MoM), the monthly improvement came on the back of higher remittances in Mar'17 amounting to US$1.69bn, recording sequential rise of 20%MoM. However, current account dynamics remain considerably weaker on YoY basis, with US$122mn surplus recorded in Mar'16, on continued escalation in imports (+34%YoY to US$4.3bn) particularly on higher auto/machinery imports (+42%YoY/+35%YoY in Mar'17) and higher crude oil prices (avg. Arablight up 51%YoY in Mar'17). The cumulative CAD for 9MFY17 amounted to US$6.1bn, rising significantly by 161%YoY bringing the deficit close to 1.9% of the GDP (vs. 0.83% in 9MFY16) reflecting weak trade dynamics (+33.1%YoY to US$17.8bn). Going ahead, current account is expected to continue its downward spiral on account of falling exports in FY17, rise in imports (from higher machinery and oil imports) and remittances remaining flat.
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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