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Pakistan Fertilizer_Super tax and higher finance cost to weigh earnings down, (AKD Daily, Jul 19, 2022)

Super tax and higher finance cost to weigh earnings down

FFC: EPS expected to clock in at PkR2.2 in 2QCY22: FFC is expected to post topline of PkR29.9bn in 2QCY22, up by 34%/14% YoY./QoQ. The increase in topline is primarily driven by higher urea prices, which is up by 12%/6% YoY/QoQ. Urea volumes also improved by 15%/2% on YoY/QoQ basis. Gross margins are expected to inch up by 280bps on QoQ basis, thanks to higher urea price. Finance cost is expected to increase by ~3.5x on YoY basis, attributable to higher debt levels and increase in financing rate. Other income is likely to clock in at PkR2.9bn, amid higher short term investment and potential dividend from PMP. Recently announced super tax will weigh down on earnings, as taxation charge for the quarter is likely to increase by ~3x as com-pare to SPLY. We expect company to announce cash dividend of PkR1.75/sh, taking 1HCY22 DPS to PkR5.45/sh.

EFERT: EPS expected to clock in at PkR1.17 in 2QCY22:Engro Fertilizer Limited is likely to post consolidated PAT of PkR1.5bn (EPS: PkR1.17) in 2QCY22, vs PkR4.7bn (EPS: PkR3.57) in SPLY. Topline is expected to increase by 43% on YoY basis, attributable to higher urea prices and better sales volume of phosphatic fertilizers. On YoY basis, gross margins are expected to decline by ~850bps due to absence of concessionary gas tariff and lower volumetric sales of trading portfolio. On quarterly basis, GMs are expected to remain flattish. Taxation charges for the quar-ter are expected to clock in at PkR5.6bn, up by ~2x YoY. We expect company to announce cash dividend of PKR1.5/sh, taking 1HCY22 dividend to PkR7/sh.

FFBL: EPS expected to clock in at PkR0.89 in 2QCY22:FFBL is expected to post unconsolidated PAT of PkR1.15bn (EPS: PkR0.89), down by 56%/29% YoY/QoQ basis. Topline is expected to in-crease by ~145% on YoY basis, thanks to higher fertilizer prices and ~50% increase in DAP sales volume. Gross margins for the quarter is expected to clock in at ~17%, down by ~400bps on QoQ basis, due to higher phos acid prices. Finance cost is expected to increase by ~100% on YoY basisto clock in at PkR1.2bn, attributable to higher borrowing cost. Taxation charge to inch up 5.8x on YoY basis, due to imposition of super tax. We don’t expect any dividend from the company.