Pakistan Fertilizer: Fundamentals remains strong, (AKD Daily, Nov 08, 2018)
- Demonstrating improved sector’s fundamentals, AKD Fertilizer Universe posted strong earnings growth of 73%YoY and 56%YoY in 3QCY18 and 9MCY18, respectively.
- Impressive earnings performance by our Universe (3QCY18/9MCY18) emanates from: i) 12%/15%YoY jump in urea offtake, and ii) higher urea prices (+24%/13%YoY), and iii) consequent 7.5/5.4ppts recovery in primary margins (GMs) to 33.7%/31.9%, respectively.
- In this regard, FFBL led the board with 7.4xYoY accretion in 3QCY18 earnings, followed by 82%YoY and 80%YoY growth in EFERT and FFC bottom-line respectively. At the same time, FATIMA posted a relatively lower earnings growth of 30%YoY in the latest quarter.
- Going forward, we anticipate better results in the last quarter of CY18 on the back of: i) upward trend in local product prices, ii) higher offtake in Rabi season and 3) swift pass on of recent gas price hike.
- In this backdrop, Fertilizer sector has gained 19.6%CYTD, outperforming the KSE-100 index by 17.3% during CY18. With this impressive run-up, we assert a Market-weight stance on the sector as positives are mostly incorporated into valuation, where EFERT (TP of PkR87.8/sh) remains our top pick on an appealing dividend yield of ~13% (total return 19%).
AKD Research
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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