Pakistan Fertilizers : Low inventory levels increase likelihood of another price uptick
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NFDC reported above-expected urea offtake for May’18 at 494ktons, down 5% YoY (up 32% MoM), mainly due to pre buying by dealers during earlier months. FATIMA outperformed industry sales and posted 75% YoY rise in its offtake.
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On a cumulative basis, urea offtake during 5MCY18 was recorded at 2.12mn tons, reflecting an expansion of 29% YoY.
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DAP offtake during the month was recorded at just 59ktons down 15% on both YoY and MoM basis as higher prices and delay in Kharif sowing weighed in on sales. On a cumulative basis, total DAP offtake grew 3% YoY to reach 492ktons.
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Low inventory levels (329ktons), strengthen case for another round of price increase, in our view, where we expect FFC & FFBL to benefit the most from any price uptick. Furthermore, any potential increase in gas tariff would give players additional justification for raising prices.
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We maintain our overweight stance on the fertilizer sector and highlight EFERT (TP: PKR83/sh) as our top pick.
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