Pakistan Fertilizers: From export to import
After exporting more than 500k tons of Urea last year on account of all-time high inventory levels, the fertilizer sector dynamics are likley to take another turn this year with the industry expecting acute shortage of urea during the later part of CY18. Currently standing at 436k tons in Apr'18 (significantly lower than last 2yr average of 1.5mn tons - equivalent to just 0.9x of one month's average production), we expect urea inventory to further go down to extreme levels in the upcoming months owing to: 1) continued high demand in the ongoing kharif season, followed by Rabi season later in Oct-Dec, and 2) lower industry production due to closure of LNG based plants (economically infeasible LNG cost) and limited gas supply. In this regard, MoI is already considering NFML's proposal of importing 0.6mn tons urea in the current calendar year to meet the expected demand-supply gap. In our view, this highly probable import scenario presents a lucrative opportunity to local manufacturers to further increase local urea price which is currently available at ~12-15% discount to prevailing elevated cost of imported fertilizers (higher int'l prices coupled amid sharp currency depreciation). Having posted a strong recovery (market capitalization is up 13.8% CYTD) on improving fundamentals, we expect sector to remain in limelight where EFERT (TP of PkR87.8/sh) remains our top pick on the basis of an attractive dividend yield of ~11%, followed by FATIMA (TP of PkR45.1/sh).
Fauji Fertilizer is engaged in the manufacturing, purchasing and marketing of fertilizers including the investment in other fertilizer manufacturing operations. As of Dec 31 2004, Co. had a design capacity of 2,455,000 tonnes for urea production and 445,000 tonnes for DAP production.
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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