FFBL_FFC & EFERT_Result Previews 2QCY21 (AKD Daily, Jul 26, 2021)
AKD Daily
FFBL, FFC & EFERT: Result Previews 2QCY21
FFBL – Sequential dip on absence of dividend income: Fauji Fertilizer Bin Qasim Ltd (FFBL) is expected to post 2QCY21 unconsolidated NPAT of PkR793mn (EPS: PkR0.61), as opposed to NLAT of PkR1.16bn (LPS: PkR0.90) in the same period last year. The turnaround in earnings is expected on the back of (i) 14% YoY increase in revenue, courtesy uptrend in local urea and DAP prices, (ii) uptick in gross margins expected at 21% in 2QCY21 vs. 13% in 2QCY20 courtesy higher DAP primary margins, (iii) 75%YoY decline in other expense in absence of one-off impairment charge booked in 2QCY20 and (iv) 55% YoY decline in finance cost amid lower interest rates. On sequential basis, the 37% decline in NPAT is expected on the back of 83%QoQ decline in ‘other income’ (absence of dividend income), which will outweigh the increase on gross level. For 1HCY21, FFBL, is expected to post NPAT of PkR2.06bn (EPS: PkR1.60) vs NLAT of PkR4.21bn) (LPS: PkR3.26) in the same period last year. Our TP of PkR37/sh implies a Buy stance at last day closing price.
FFC – Muted 2QCY21 NPAT contain 1H EPS growth at 14%: Fauji Fertilizer Company Ltd (FFC) is expected to announce NPAT of PkR4.63bn (EPS: PkR3.64) in 2QCY21, flattish on YoY basis, but down 20%QoQ. This will take 1HCY21 NPAT to PkR10.45bn (EPS: PkR8.21), up 14%YoY. The QoQ decline in earnings is majorly expected on the back of normalization of gross margins to 33% vs. 39% in 1QCY21 and absence of dividend income. The increase in 1HCY21 earnings is expected to emanate from (i) 214bps YoY higher gross margins amid flattish revenues and, (ii) 26%YoY decline in finance cost. The company is also expected to announce second interim cash dividend of PkR3.0/sh taking cumulative payout to PkR6.5/sh for 1HCY21. Healthy EBITDA margins will enable the company to maintain its historical payout ratio of 75%+, despite upcoming GIDC payments as per Supreme Court’s decision. Our TP of PkR145/sh implies a Buy stance at last close.
EFERT – 2Q NPAT to decline 28%QoQ; healthy payouts to continue: Engro Fertilizer Ltd (EFERT) is expected to post 28%QoQ lower NPAT of PkR4.14bn (EPS: PkR3.10) in 2QCY21, taking the 1HCY21 NPAT to PkR9.8bn (EPS: PkR7.40), up 122% YoY. For 2QCY21 alone, the decline in earnings is expected on the back of 20% YoY lower urea offtakes (high base effect), nullifying higher urea and DAP prices. On the flipside, 54% YoY lower finance cost and 130% YoY higher ‘other income’ will likely contain decline in earnings. For 1HCY21, the earnings are expected to post 122% YoY increase on the back of (i) 50% YoY increase in revenues (low base effect - EFERT’s urea offtake suffered in 1QCY20 from a delayed reduction in urea price as compared to peer FFC), (ii) 106%YoY higher other income, (iii) 68% YoY lower finance cost and (iv) lower effective tax rate of 32% vs 35% in the same period last year. The company is also expected to announce 2nd interim cash dividend of PkR3.0/sh, taking 1HCY21 payout to PkR7.0/sh vs. PkR4.0/sh in 1HCY20. At our TP of PkR69.1/sh, we have a Neutral stance on the scrip 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.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.