Pakistan Fertilizer: Maintain ‘Overweight’ post GIDC, (AKD Daily, Sep 03, 2019)
- We update our Fertilizer sector estimates post the promulgation of presidential ordinance w.r.t GIDC amendment 2019. We incorporate (i) lower GIDC rates by PKR150/75 per mmbtu for feed/fuel, effective Jul’19, while (ii) reducing our urea price assumption by PKR200/bag. We maintain an Overweight stance on the Fertilizer sector, with FFC as our top pick (total return: 35.9% on LDCP).
- For FFBL, we have also revised down our primary margins on DAP by US$10/ton to US$110/ton, (DAP retention price of PKR3,685/bag for CY19F), as FFBL continues to grapple with passing on cost inflation due to import parity.
- Consequently, our TP for both, FFC and FFBL is up by only 2% to PKR116.5/sh and PKR32.6/sh, respectively. Meanwhile, downward revision in urea price has trimmed our 3yr average earnings estimates and TP for EFERT by 11/8%, respectively.
- As per the amendment 2019, 50% lower GIDC rates are applicable from the date of the agreement between GoP and subject-company, as opposed to effective date of Jul’19 as per the initial proposal. For every 90 days of delay in application of lower GIDC rates from 1st July’2019, FFC, FFBL, EFERT and FATIMA are expected to have a negative EPS impact of PKR1.34, 0.78, 0.23 and 0.02, respectively.
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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