EUR 4.56 For Business Accounts Only

Fertilizer offtake remained healthy in Jan’17

• Fertilizer offtake for Jan’17 broadly improved on a YoY basis with Urea/CAN/NP witnessing growth of 17%/76%/79%; however, DAP offtake saw a decline of 20%YoY, due to reduction in subsidy amount to PkR300/bag vs. PkR500/bag in the same period last year.

• We attribute major increase in Urea/CAN sales to available subsidy, while better NP offtakes instead of DAP can be attributed to increase sugarcane crop acreage, as stated earlier by SBP. Urea inventory as off Jan’17 stands at 1.03mn tons, up 56%YoY, on better gas supply in CY16.

• Reduction in promotional pricing discounts on Urea and export of 300k tons Urea may provide short term relief; medium term dynamics however, may continue to remain subdued on supply overhang and limited pricing power. We continue our relative preference for EFERT (Dec’17 TP: PkR72/sh), as the stock offers both potential upside (7%) and best-in-sector forward D/Y (11%).