Pakistan Fertilizers: Subsidy reversal to serve negatively for demand
- ​​In a recent development, GoP has reportedly notified the annulment of subsidies on all fertilizers provided in FY17 budget. Such an abrupt decision can potentially have negative bearings on sector demand dynamics upto the tune of 250k-300k tons for Urea and 400k-450k tons for DAP, in our view.
- To recall, in FY17 budget GoP had announced to reduce Urea prices by PkR390/bag and DAP by PkR300/bag, which led to substantial increase in offtakes by 36%/22% YoY in Urea/DAP in 2HCY16. Now, reversal of subsidy can lead to increase in Urea/DAP prices by PkR340/250 per bag, in our view.
- We believe this event would likely lead to reduction in fertilizer demand, and accumulation of further inventory within the currently over-supplied Urea market. We are under weight on Fertilizer sector with June’16 target prices of PkR99.5, PkR69.3 and PkR37.1 for FFC, EFERT and FATIMA respectively.
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.
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.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.