Value proposition holds. The government issued a new feedstock formula on 13 September that moves Abu Qir away from a fixed gas price of USD5.75/mmBtu to one that is linked to end-product prices. The decision raises the producer’s gas prices in the short term (by 30% in FY23e and 13% in FY24e), but reduces it beyond FY24e, based on our urea price outlook. With EGP weakness and a higher cost of capital assumption, the net effect is a 9.5% cut in our 12M TP to EGP38.0/share. Abu Qir trades on an E...
ABOU KIR FERTILIZERS (EG), a company active in the Speciality Chemicals industry, is favoured by a more supportive environment. The independent financial analyst theScreener has confirmed the fundamental rating of the title, which shows 3 out of 4 stars, as well as its unchanged, defensive market behaviour. The title leverages a more favourable environment and raises its general evaluation to Positive. As of the analysis date March 15, 2022, the closing price was EGP 24.00 and its potential was ...
Raise 12M TP by 36%, on favourable industry dynamics. We raise 2022-24e EBITDA for MOPCO by an average of 24%, on higher urea price assumptions to reflect a more protracted period of tightness in global urea supply. Developments in Russia have a two-fold bearing on urea; by reducing export supply from Russia (c18% of the global urea merchant market), as well as placing upward cost pressure on European gas-based production. On our new 12M TP for MOPCO of EGP174/share, we see ~91% upside on the st...
Strong value proposition; Top pick in Egypt. We raise our FY22-24e EBITDA by an average of 39%, mainly on higher urea prices, and expect FY22e EBITDA to rise +c3x y-o-y to EGP9.9bn, pushing net cash up to EGP11.3bn, ~40% of market cap. Abu Qir trades on an FY22e EV/EBITDA of 1.6x vs. its five-year average of 7.7x and peers’ 5.2x, despite offering a FY22e dividend yield of 13%. While Abu Qir and MOPCO are now on par on valuation, we prefer Abu Qir for being more advanced in cash deployment, and i...
The independent financial analyst theScreener just awarded an improved star rating to MISR FRETILIZERS (EG), active in the Speciality Chemicals industry. As regards its fundamental valuation, the title receives an improved star rating and now shows 1 out of 4 possible stars. Given its market behaviour as moderately risky, theScreener considers that these elements allowing slightly upgrading its general evaluation to Neutral; the title, however, remains unattractive. As of the analysis date Febru...
Cut 12M TP by 10%. We update our forecasts to reflect: i) higher than previously expected export prices, ii) a local quota of 55% (30% previously), but at the 47% higher local urea subsidy price (USD287/t), gradually reaching full liberalisation of USD340/t by 2027e, and iii) 2023-27e average gas price of USD5.9/mmBtu. This gas price is +1.7x vs. the formula implied gas price (so far in place), as the government demonstrates increased involvement to maximise its profit windfall from elevated com...
Value in robust urea fundamentals. Abu Qir Fertilizers, Egypt’s largest nitrogen (N) fertiliser plant (2.2mn tpa), is a beneficiary of Europe’s ongoing energy supply crunch and China’s coal price surge (Egypt hub at USD845/t, a 13-year high). We expect FY22e EBITDA to rise 2.5x y-o-y to EGP8.6bn, pushing net cash up to ~39% of market cap. We resume coverage with a 12M TP of EGP29.0/share, implying an EV/EBITDA of 3.0x for FY22e vs. 4.7x for industry peers. Growth prospects beyond current urea s...
LOCAL QUOTA PRICES AND VOLUMES ADJUSTED TO NARROW THE GAP WITH INTERNATIONAL PRICES AND IN TANDEM WITH RECENT HIKE IN GAS COST In a move to narrow the gap between local quota fertilizer prices and international pries, nitrogenous fertilizer producers are now required to supply 55% of their production to the Ministry of Agriculture, a percentage equivalent to about 3.7 million tons annually, which covers the demand of the local market. Local prices have been raised from EGP2,900 per ton to EGP...
TOPLINE SURGES YEARLY ON STRONG UREA PRICES ABUK reported 1Q21/22 sales of EGP 2,655 million (+52% YoY, + 5%QoQ). Despite the sequential decline in volumes sold (-6%QoQ), sales were primarily boosted by the undergoing surge in urea prices, as European producers saw prices averaging USD440/ton (+28%QoQ, +186%YoY), while prices in Egypt hit an average of USD477/ton (+23%QoQ, +80%YoY). MARGINS SURGE ACROSS THE BOARD Gross profit hit EGP1,550 million (+136%YoY, +24%QoQ), implying a GPM of 58.4%, ...
UREA MARKET IS TEARING IT UP Just as the pandemic dragged Urea prices in early 2020, it appears to have completely turned a corner and grew into a contributor to the rally, albeit in an implicit way as prices hit (USD950/ ton in Egypt, USD875/ton in Europe, USD750/ton in North America and lastly USD625/ton in China). Prices have been buoyed by several factors, including: i) the ensuing energy crunch in Asia and Europe, which forced major urea producers to scale back production, and in some ca...
Urea fundamentals beat. Granular urea prices have risen c170% y-t-d to USD752/t (Egypt, fob), spurred by rising energy costs. Europe’s energy crisis has sent natural gas prices to a record USD31/mmBtu (Dutch TTF gas hub), and a cutback on coal production in China has propelled the price of coal (c75% of its urea production) to a 2012-21 high of USD153/t. This situation will likely persist over 1Q22. While crop inventory is low, we predict that the combination of: i) new urea capacity hitting the...
SALES, MARGINS, AND EARNINGS BOOM ON UREA PRICE RALLY MOPCO achieved a 2Q21 sales figure of EGP2,186 million (+9% QoQ, +12% YoY), primarily boosted by the ongoing rally in urea prices. Gross profit for the quarter hit EGP1,235 million (+19% QoQ, +43% YoY), implying a GPM of 56.5%. The healthy GPM could be also heavily attributed to the urea price rally, alongside modest levels of feedstock costs. The strong gross profit figure filtered down to the company’s EBITDA as It recorded EGP1,425 mill...
Top line rises sequentially and yearly on strong price growth ABUK reported 4Q20/21 sales of EGP2,535 million (+22% YoY, +12% QoQ). The sales figure was mainly boosted by strong urea prices given the price rally recorded in 4Q20/21 as Black Sea Urea prices managed to average USD348/ton (+62% YoY, +11% QoQ) while Egypt’s urea prices averaged USD387/ton (+68% YoY, +8% QoQ). As mentioned, sales growth was mainly price driven given that volumes sold during 4Q20/21 managed a slight hike of 1% QoQ ...
Full Article at IIR has reaffirmed its Recommended rating for PIA after undertaking a review post the appointment of a new Portfolio Manager, Harding Loevner. The full report can be found on the IIR website. On 26 July 2021, Pengana International Equities Limited (PIA) announced a fully franked dividend of 1.35 cents per share for the June quarter. This represents an 8% increase on the March quarter dividend and takes the total dividends declared for FY21 of 5.1 cents per share, fully franked....
In this report we assess the average material prices for 2Q21 and depict the impact of pricing trends on the financial performance of the relevant listed equities in Egypt. Prices of raw materials in the food and beverages sector continued to normalize in 2Q21, except for prices of SMP and WMP. Accordingly, we expect a gradual recovery of margins to appear in the 3Q21 results of JUFO, EFID, DOMT and OLFIas price increases kick in and with seasonality of revenues. Most companies have an invent...
Value proposition in good industry times. MOPCO stock is up over 106% y-o-y, but still trades c67% less than the sector on a 2022e EV/EBITDA of 2.7x (P/E of 5.3x). It offers strong cash generation, with a 2022e FCFE yield of 10% (+12pp to 22% in 2023e even at USD280/t for urea c30% lower than spot), availing faster deleveraging (debt-free by end-2022) and DPS expansion; 2021e dividend yield of 6.6%, rising to 10.6% in 2022e. Our base case factors a EGP2.2bn deduction as the PV of deferred tax pa...
SALES SURGE AIDED BY UREA PRICES, NOTING SEQUENTIAL MARGIN PRESSURE MFPC released its consolidated financials for 1Q21. Sales recorded EGP1,996 million (+7%% Qo+11%YoY). We believe: 1) urea prices were the primal reason for the sequential hike in sales figure, given urea prices were up 29%QoQ and 43%YoY, 2) Volumes sold declined sequentially and yearly by 17% and 22%, respectively. Gross margin for the quarter came in at EGP1,038 implying a GPM of 52.0% vs 4Q20’s GPM of 51.9%, which cements o...
HIGH PRICES COMPENSATE FOR SEQUENTIAL LOWER BOOKED VOLUMES ABUK released its 3Q20/21 audited financial statements, posting a sales figure of EGP2,269 million (+25% YoY, Flat QoQ). On a yearly basis the rebound in sales was both volume and price driven given that 3Q20/21 volumes sold were 559k tons versus 536k tons in the comparable period and average urea prices recorded USD315/ton during 3Q20/21 versus a weak USD222/ton in 3Q19/20. However, despite strong urea price growth, topline came in f...
We present the 1Q21 material prices that are relevant to the petrochemical, consumer and industrial & materials sectors. In our 12-page report, we depict the impact of such changes on the financial performance of listed equities in Egypt. We also present the quarterly breakdown of each sector. Most companies have inventory of raw material that covers somewhere around 2-3 months. The increase in raw material costs is slowing down in 2Q21. Accordingly, we expect the pressure on margins to appe...
Nitrogen fertilizers endured – like many of its chemical peers – a tricky year in 2020 with regards to price fluctuations as markets around the globe learnt to adjust with the blitz of a global pandemic. Urea prices had flirted with lows of USD200/ton for a sizeable portion of 2020 before normalizing at the acceptable level of USD245/ton. Currently, most urea indices that we track are hovering around the very healthy levels of USD300-350/ton bolstered by I) Soaring grain prices that are drive...
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