Intermarket Intel - FATIMA: Results are well-above expectations due to higher offtakes & lower ETR
- FATIMA announced 4QCY17 unconsolidated NPAT of PRs3.90bn (EPS: PRs1.86), up 14% YoY. The result is above our expected 4QCY17 NPAT PRs2.48bn (EPS: PRs1.18). The company also announced final cash dividend of PRs2.25/sh vs. PRs3.25/sh in CY16.
- This takes CY17 unconsolidated NPAT to PRs10.57bn (EPS: PRs5.04), up 8% YoY amid 28%/52% YoY growth in Urea/CAN offtakes. However, NP offtakes declined 8% YoY. The company incurred losses of PRs1.32bn from DH Fertilizers amid inconsistent plant operations on RLNG.
- We attribute deviation in our estimates to higher than expected Urea and CAN sales. Consequently, the company also realized higher GMs of 59% during 4Q (vs. our expectation of 54%) amid better efficiencies and higher contribution from better margin CAN sales.
- Other highlights for 4Q include admin expenses of just PRs45mn, down 7x YoY, ETR of 13%, down 3ppt YoY, and 28% YoY drop in finance cost.
- We await further clarity upon release of annual accounts before revisiting our investment thesis on the stock. For now we have a Sell stance with Dec’18 TP of PRs26.5/sh.
Fatima Fertilizer Company Limited is a Pakistan-based fertilizer manufacturing company. The Company is engaged in manufacturing and marketing of Nitrogen, Phosphate and Potash fertilizers. It produces a range of fertilizers, including Sarsabz Calcium Ammonium Nitrate (CAN), Sarsabz Nitro Phosphate (NP), Nitrogen Phosphorous Potassium (NPK) and Sarsabz Urea. Its CAN is a granulated nitrogenous fertilizer. Sarsabz Urea can be applied in various forms and it can be spread in bulk alone or can also be mixed with other fertilizers before application. Its NP can be applied on various types of soils. The Company has a production base for Nitric Acid. The Company has annual production capacity of Urea 500,000, CAN 420,000, NP 244,000, Nitric Acid 500,000 and Ammonia 500,000. It also offers services and support to farmers from education on farming practices and research oriented agricultural practices.
Intermarket Securities Limited (IMS) is a full service corporate brokerage firm based in Karachi, Pakistan. We service both domestic and international clients. IMS was ranked #2 Best Local Brokerage and #3 Best for Overall Country Research for 2016 by AsiaMoney.
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