Fauji Fertilizer Bin Qasim (FFBL): 1Q2018 LPS Rs0.26, vs. LPS of Rs0.43 in 1Q2017 (In line with expectations)
- where company reported LPS of Rs0.26 per share vs. LPS of Rs0.43 per share in 1Q2017. Company reported decline in losses primarily on the back of improved GP margins of its core fertilizer business to 7% vs. -3% in corresponding period of last year.
- Margins in core operations improved during 1Q2018 mainly due to increase in UREA retention prices by ~2.3% to Rs1,310-1,315 per bag. While, change in DAP subsidy disbursement mechanism to lower sales tax of Rs100 per bag (from earlier cash subsidy) also provided some respite to the margins.
- Company reported net revenues growth 45% YoY to Rs14bn primarily due to 1) increase in its core business by 30% YoY to Rs10bn owing to increase in urea offtakes by 133% YoY to 88k tons, and 2) increase in Food (Fauji Foods) business by 54% YoY to Rs2bn.
- Other income of the company fell by 65% YoY to Rs627mn, due to change in subsidy mechanism of the company (Cash subsidy of Rs300/bag was replaced with reduced sales tax of Rs100/bag) and decline in profit from associates by ~55% YoY to Rs203mn.
- Finance cost went up by 62% YoY to Rs1bn owing to higher debt financing facilities obtained by its subsidiaries Fauji Foods and Fauji Meats.
- 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) and 3) barrier to entry in export countries for meat segment.
Fauji Fertilizer Bin Qasim Limited is a Pakistan-based holding company. The Company manufactures, purchases and markets fertilizers. It is involved in meat, dairy and coal based energy generation sectors. It has identified its potential business segments and has undertaken investments in the areas of food, financial, power sector and wind energy projects. Its products include Granular Urea, such as Sona Urea, and Di Ammonium Phosphate (DAP), such as Sona DAP. Sona Urea is a synthetic organic compound containing nitrogen in amide form available in the form of white solid prills. It is applied to soil and also suitable in solution form as spray application. Sona DAP contains nutrient element, phosphorous besides nitrogen available in flowing granular form Granules are stronger, harder and of uniform size. It is suitable for various crops and soils recommended for initial application. It produces over 791,260 metric tons (MT) of DAP and approximately 433,610 MT of Urea.
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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