FFBL_1QCY21 EPS clocked in at PkR0.98 - (Below expectation), (AKD, Off the Analyst's Desk, April 26, 2021)
AKD, Off the Analyst's Desk
FFBL: 1QCY21 EPS clocked in at PkR0.98 - (Below expectation)
- Fauji Fertilizer Bin Qasim Ltd (FFBL) announced 1QCY21 unconsolidated NPAT of PkR1.27bn (EPS: PkR0.98), as opposed to NLAT of PkR3.05bn (LPS: PkR2.36) in the same period last year. The earnings was below our expectation due to lower than expected gross margins.
- Nevertheless, the bottomline remained in green during 1Q, as opposed to losses in 1Q over last 5 years due to seasonality factors, further worsened by macro deterrents. Key highlights of the result include (i) 36% YoY increase in revenue, courtesy uptrend in local DAP prices, (ii) decline in feed/ fuel gas prices, courtesy GIDC elimination leading to gross margins in double digit vs. -5.8% in 1QCY20, (iii) 4.95xYoY higher other income, courtesy dividend income from AKBL announced in previous quarter and, increase in cash reserves, and (iv) 57% YoY decline in finance cost amid lower interest rates.
- On sequential basis, the 59% decline in NPAT came on the back of seasonal dip in DAP offtake (down 68%), with revenues down 61%, despite increase in DAP and urea prices. Meanwhile, 28%QoQ decline in finance cost was offset by unwinding of GIDC impact.
- Bull cycle in DAP prices comes at seasonally slow period, diluting its potential impact on FFBL’s earnings in 1HCY21, where upside risk emanates from continued bullish trend in DAP prices in 2HCY21 – our estimates conservatively incorporate normalization of local DAP prices in 2HCY21. Our TP of PkR31.4/sh, nonetheless implies a Buy stance at last close.
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.
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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