Pakistan Fertilizer: Export quota doubled to ease inventory
​In a meeting held yesterday, ECC of the cabinet has decided to increase the quota of urea exports by another 300k tons (100% increase) to 600k tons owing to ample amount of Urea inventory available in the country (Mar'17 urea inventory stands at 1.52mn tons, up 27%MoM/26%YoY). The committee also extended the deadline for urea export to Oct 31'17 (previous Apr 28'17 for 300k tons). Out of initial allocated quota of 300k tons, local manufacturers were hardly able to export ~40k tons of the commodity to East Africa region at an estimated FOB price of ~US$230-240/ton. In this regard, despite attractive quota allocation, the recent downtrend in international urea prices (down 30%CYTD to US$170/ton breaking its last summer's low of US$171/ton in Jul'16) limited the attractiveness of exporting the excess urea inventory. In this backdrop, we believe urea exports are likely to remain infeasible at current price levels (AKD Fertilizer Universe profitability to go down by 5%-14%) where our working estimates a price level of US$220-235/ton for the manufacturers to breakeven. FFC is likely to be the most impacted whereas FATIMA remains largely immune given its lowest per bag manufacturing cost. While we continue to maintain our Marketweight stance on the sector until a sustainable improvement in the demand scenario, FATIMA (DCF based TP of PkR45.1/sh) remains our top pick on account of its:1) diversified product mix and 2) concessionary gas pricing.
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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