Fauji Fertilizer Bin Qasim (FFBL): 2Q2019 LPS Rs0.55, down 44% YoY (Result above expectations)
- Fauji Fertilizer Bin Qasim (FFBL) posted loss of Rs0.55 per share on consolidated basis due to decline in GP margins by 2ppts YoY to 16% and increase in finance cost by 98% YoY to Rs2.3b for 2Q2019.
- Food business of the company (Fauji Foods) posted gross loss of Rs444mn (or 39% of sales) in 2Q2019 vs. Rs29mn in corresponding period of last year due to increase in cost of production owing to rupee devaluation and tough competition from peers, we believe.
- However, GP margins in fertilizer business witnessed increase of 3ppts YoY to 11% amidst better urea pricing.
- Finance cost increased substantially amid increase in interest rate and borrowings of the company.
- Share of profit from associates/JV increased 450% YoY. Higher profit under this head could be attributed to positive contribution from Foundation Wind Energy I and II, we believe.
- Further, the company booked tax reversal of 19% in 2Q2019 vs. tax expense of 37% in 2Q2018.
- Key risks to our forecast includes: 1) change in regulatory structure in Milk segment, 2) increase in coal and gas prices beyond our assumptions (the primary raw material), 3) barrier to entry in export countries for meat segment and 4) unfavorable GIDC decision.
Topline Securities is one of the fastest-growing brokerage houses in Pakistan. It has strong Equity Brokerage, Economic/ Equity Research, Commodity Trading and Corporate Finance & Advisory functions.
Topline Securities has been endowed with numerous awards by renowned international financial organizations. The highlights of which consists of the award for ‘Best Local Brokerage House of Pakistan’ by Asiamoney Brokers Poll (the largest Asia-focused equity services provider poll) in 2016 and ‘Best Equity Brokerage House’ by CFA Society Pakistan in 2015.
Previously, Topline Securities held the title for ‘Best Brokerage House’ for 4 consecutive years (2011-2014) by Asiamoney Brokers Poll. Other awards include the ‘Best Salesperson’ award by Asiamoney for 6 consecutive years (2011-2016), the ‘Arabia Fast Growth 500’ award and ‘Pakistan Fast Growth 100’ award in 2012 and 2013 by AllWorld Network.
JCR-VIS, a credit rating agency providing independent rating services in Pakistan has assigned initial rating of “A-2” for short term and “A” for long term to Topline Securities. Topline Securities is registered as Underwriter, Book Runner and Research Entity with Securities & Exchange Commission of Pakistan (SECP).
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