Fauji Fertilizer Bin Qasim (FFBL): 2Q2018 LPS Rs0.99, vs. LPS of Rs0.1 in 2Q2017; (Below expectations)
- Fauji Fertilizer Bin Qasim (FFBL) announced its financial results for 2Q2018, where company reported LPS of Rs0.99 per share vs. LPS of Rs0.1 per share in 2Q2017. Company reported increase in losses amidst increase in finance cost and other expenses by 33% YoY and 10.6x YoY respectively, with former due to increase in both debt borrowings and interest rates and latter due to exchange losses, as per our channel checks.
- Company reported increase in net sales by 37% YoY to Rs13bn during 2Q2018, mainly due to increase in fertilizer revenue by 14% YoY. Furthermore, its subsidiary (Fauji Foods or FFL) also recorded revenue growth of 54% YoY to Rs2bn.
- Fertilizer revenue increased due to increase in urea and DAP prices by around 10% and 20% respectively.
- Gross margins of the company went up by 5.3ppts YoY to 19.1% amidst increase in GP margins of FFL by 5.1ppts YoY to 7.1%. While GP margins of fertilizer business were marginally up by 0.6ppt YoY to 7.8% in 2Q2018.
- Substantial decline was witnessed in other income to Rs369mn in 2Q2018 from Rs1.2bn in corresponding period of last year, as cash subsidy on DAP was discontinued in FY17-18, while on urea company recorded subsidy income for only half of the quarter (till May 07, 2018).
- 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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