Report
EUR 8.87 For Business Accounts Only

Pakistan Fertilizer_Subsidy expected to normalize inventory, (AKD Daily, May 28, 2020)

AKD DailyAKD DailyPakistan Fertilizer: Subsidy expected to normalize inventory• As per the data released by NFDC, urea offtake for Apr’20 declined by 20/17% MoM/YoY to 242K tons. The sequential decline in numbers was witnessed industrywide (except for EFERT), in anticipation of Fertilizer subsidy announcement.• The overall urea offtake in 4MCY20 clocked in at 1.2mn tons, down 23% YoY. Staggered decline in urea prices (EFERT delayed pass-on of GIDC elimination benefit) throughout the 1QCY20 coupled with subsidy in the offing led to famers delaying fertilizer purchase.  • Urea inventory has increased to 859K tons, up 2.6x YoY, with EFERT accounting for 60% of total  inventory. Subsidy on urea (PkR243/bag, 15% of urea price) may thus help in normalization of overall inventory levels, with EFERT as a major beneficiary in our view.• DAP offtake for Apr’20 clocked in at 150K tons, up 2.8x YoY, and 90% MoM. FFBL accounted for 58% of the total DAP inventory, and will likely witness an uptick in offtakes post subsidy on DAP (PkR925/bag, ~28% of current DAP price).• We maintain a Buy stance on Fauji Fertilizer Company Ltd (FFC) at a TP of PkR137/sh, implying an upside of 26% at last close. While the scrip has outperformed the market by 24% CYTD, we foresee room for further price performance based on CY20/21F D/Y of 12/12% on offer.AKD Research

Underlying
Fauji Fertilizer Bin Qasim Ltd.

Fauji Fertilizer Bin Qasim Limited. 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.

Provider
AKD Securities Limited
AKD Securities Limited

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.

Analysts
Ailia Naeem

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