FFBL & EFERT_2QCY20F Result Previews, (AKD Daily, Jul 10, 2020)
AKD Daily
FFBL & EFERT: 2QCY20F Result Previews
Fauji Fertilizer Bin Qasim Limited: FFBL is expected to announce its 2QCY20F earnings on 24th Jul, 2020. We expect the company to post 2QCY20 NPAT of PkR448mn (EPS: PkR0.48) as compared to NLAT of PkR84mn (LPS: PkR0.09) in the same period last year. The turnaround in the bottomline is expected on the back of gross margins expected at 18.8%, up 780bps YoY due to (i) GIDC elimination and (ii) decline in intl. coal prices, resulting in cheaper feed and fuel gas cost. However, 57% YoY lower other income, despite recording dividend from AKBL may keep the bottomline growth in check. On a cumulative basis, FFBL is expected to post NLAT of PkR2.6bn (LPS: PkR2.78) vs. PkR1.9bn (LPS: PkR2.09) in the same period last year, dragged down by disappointing 1QCY20 results. On a sequential basis, the turnaround is expected on the back of: (i) 56% QoQ higher topline led by 2.5x/33% QoQ higher urea/DAP offtake, (ii) gross margins expected to be in double digits as opposed to -6% in 1QCY20, (iii) 54% QoQ higher other income, and (iv) 28% QoQ decline in finance cost due to lower discount rate. Downside risk to our estimates include: higher than anticipated exchange losses and/or taxation.
Engro Fertilizer Limited: EFERT is expected to post a 29% YoY higher NPAT of PkR4.1bn (EPS: PkR3.08) as compared to PkR3.1bn (EPS: PkR2.38) in the same period last year. The increase in earnings are expected on the back of (i) 8% YoY higher topline, where anticipated 28% YoY increase in urea offtake is expected to neutralize 23% YoY decline in DAP offtake and retention prices, (ii) 35% YoY decline in finance cost due to lower discount rate and (iii) lower effective tax rate of 29% vs. 48% in the same period last year (reversal of deferred tax asset in 2QCY19). On the flip side, 86%YoY decline in other income due to absence of one-off recorded in SPLY is expected to contain the earnings growth. On a sequential basis, the 7.2x increase in earnings is expected to be a function of 3.9/2.6x improved urea/DAP offtake, according to provisional numbers. To recall, EFERT brought its urea price at par with FFC in Mar’20, which coupled with pre-buying in Jun’20 (negative budgetary measures, potential gas price hike in offing) led to sequential uptick in offtakes. We also expect the company to announce first interim cash dividend of PkR2.5/sh alongside with result announcement, vs. PkR5.0/sh announced in 2QCY19.
AKD Research
Fauji Fertilizer Bin Qasim Limited is a Pakistan-based holding company. The Company manufactures, purchases and markets fertilizers. It is involved in meat, dairy and coal based energy generation sectors. It has identified its potential business segments and has undertaken investments in the areas of food, financial, power sector and wind energy projects. Its products include Granular Urea, such as Sona Urea, and Di Ammonium Phosphate (DAP), such as Sona DAP. Sona Urea is a synthetic organic compound containing nitrogen in amide form available in the form of white solid prills. It is applied to soil and also suitable in solution form as spray application. Sona DAP contains nutrient element, phosphorous besides nitrogen available in flowing granular form Granules are stronger, harder and of uniform size. It is suitable for various crops and soils recommended for initial application. It produces over 791,260 metric tons (MT) of DAP and approximately 433,610 MT of Urea.
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