Fauji Fertilizer Company Limited - Re-Initiating Coverage with PT of PKR 109/share; BUY
- We re-initiate coverage on FFC with Jun-18 PT of PKR 109/share offering a massive capital upside of 34% along-with dividend yield of 10%.
- Investors’ disappointment over exclusion of FFC from MSCI EM led to an underperformance of 11% against KSE-100 benchmark index - opening up valuations for investors to re-build position in the stock.
- Despite oversupply situation, the company has sustained its market share of ~43%; going forward we believe with extensive dealership network the company will sustain its market leadership with market share hovering around 43-41%.
- Furthermore, if company fully utilizes its export quota of 252Ktons, we believe inventory situation of the company would taper off by 58% while earnings can witness a further accretion of PKR 0.41/share.
- FFC has accepted the offer of 30% strategic purchase of Thar Energy Limited (TEL) 330MW coal based power plant. On a sustainable USD IRR of 20%, the project is expected to add PKR 4.7/share to our PT (additional upside of +6% upside). The plant is expected to achieve its financial close by Sep-17.
Fauji Fertilizer is engaged in the manufacturing, purchasing and marketing of fertilizers including the investment in other fertilizer manufacturing operations. As of Dec 31 2004, Co. had a design capacity of 2,455,000 tonnes for urea production and 445,000 tonnes for DAP production.
Elixir Securities Pakistan is a Corporate Member of the Pakistan Stock Exchange & Pakistan Mercantile Exchange and is one of the leading securities brokerage & investment banking firms in Pakistan, established since 1994. Our principal business activities include all aspects of Pakistan’s Capital Markets covering Securities Brokerage (Equities, Fixed Income and Commodities), Corporate Finance & Capital Markets Advisory (M&A, ECM, DCM) and Investment Research (Economics & Securities). We are one of the most active & aggressive Broker-Dealers in Pakistan executing trades for most of the Top 20 Global Brokers with unmatched corporate access credentials and have successfully advised and closed on some landmark ECM transactions in the history of Pakistan including the largest deal in frontier Asia (USD 1.02 billion). Our Clients include foreign and domestic financial institutions (Banks, Asset Managers, Insurance Companies, Pension Funds) corporates, HNWI’s and retail investors. This is supported by a very strong and independent research capability, which is quoted regularly in both local and international media.
Elixir Securities Pakistan is the proud recipient of many awards & recognitions including AsiaMoney’s Brokers Poll 2017, FinanceAsia’s Pakistan Best Investment Bank and Best Broker 2017, The Asset’s Best Brokerage House in Pakistan 2016, Asiamoney’s “Best Domestic Equity House 2015 in Pakistan”, The Asset Triple A Country Awards 2015 - Pakistan “Deal of the Year” and “Deal of the Year-Highly Commended”, CFA Society of Pakistan Awards for Year 2015 “Best Research Analyst (1st Rank), CFA Society of Pakistan Awards for Year 2014 “Best Research Analyst (1st Rank)”, “Best Trader” 2nd Runner-up (3rd Rank), The Asset Triple A Country Awards 2014’s “Best Deal in Pakistan” and Capital Finance International’s nomination for “Best Equity Research in Pakistan 2010”.
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