Pakistan Fertilizers: New Government = New Rules
We downgrade our Fertilizer universe to ‘Underweight’ as we caution against potential sectoral headwinds including i) additional available inventory via either local production and/or imports, ii) gas price hike with the PM having reportedly approved a broad based gas tariff increase and iii) potential inability to pass on cost increase (with the key word being ‘potential’). With regards to the latter, we believe any price increase may likely to be restricted by GoP action as evidenced by recent ECC discussions regarding windfall profits. At the same time, the decision to resume production on three closed urea plants (FatimaFert, Agritech and Pak Arab) on RLNG may not be viable in the context of annual costs (PkR8.4bn subsidy may not be economically feasible). If gas prescribed price hike is transposed on end consumer prices (as reported in news reports), our Fert Universe profitability for CY19 reduces by an average 14%, while adjusted TPs come at EFERT (PkR75.9/sh from current PkR87.7/sh), FFC (PkR86.8/sh; Current: PkR104.1/sh), FFBL (PkR40.1/sh; Current: PkR48.2/sh) and FATIMA (PkR38.7/sh; Current: PkR45.1/sh).
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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