Pakistan Fertilizer: Nov 2018 Urea sales down 21% YoY
- Pakistan urea sales during Nov 2018 were down 21% YoY taking 11M2018 sales to 5.1mn tons, down 1% YoY. Lower sales during outgoing month were due to early procurement by dealers and farmers amidst expectations of price hikes in Oct (Sept sales up 168% YoY) and delay in sowing season due to halt in start of sugar cane crushing by millers.
- During Nov 2018, urea production is likely to increase by 22% YoY on back of the start of urea production by FatimaFert and Agritech (contributing around 60-70k tons) and low base effect of EFERT’s production (145k tons in Nov 2018 vs. 119k tons in Nov 2017).
- Closing inventory of urea during Nov 2018 is expected around 245k tons. Reportedly, first shipment of 50,600 tons of imported urea arrived Pakistan last Sunday and further 50,000 tons will reach by this week.
- Among companies, Fauji Fertilizer (FFC) and Fauji Fertilizer Bin Qasim (FFBL) are likely to post decline of 8% and 6% YoY respectively in urea sales during Nov 2018. Similarly, EFERT’s volumes would be down by 2% YoY.
- Outlook: We maintain our market weight stance on fertilizer sector given possibility of further hike in gas tariff. Further, Govt. is more focused on improving farmers economics by reducing their cost of input (which is inline with their manifesto). Amid aforementioned reasons, we believe, margins of urea manufacturers could face headwinds in near term.
- Key Risks: Key risks to fertilizer industry, 1) decline in international urea prices, 2) slower than expected urea sales, 3) poor crop season, 4) sharp hike in domestic gas price and 5) rupee devaluation.
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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