Saturday, 3 August 2013

Fertilizer Sector Fertilizer Industry Analysis 1HCY 2013

The NFDC has discharged official detail of the manure business for the month of June'13. These numbers show a total urea offtake of 567k tons in June'13 versus 1,029k tons in June'12, this denote a 45% decrease YoY (17% Mom). This steady loss is essentially by virtue of a high base impact, as urea makers offered rebates of PKR = 150/bag to clear stock overhang in the same period a year ago.

As per information discharged by NFDC, complete compost supplements offtake checked in at 813k tons for Jun'13, expanding successively by 21% Mom. This makes as 3.59mn tons of compost offtake for 1H CY 2013 as contrasted with 3.50 mn tons for 1H CY12. This is basically by virtue of expanded compost accessibility on the again of satisfactory processing of supplements like urea, DAP & NP

Pull again at the bourse proceeded for the third back to back session underpinned by benefit taking topic after a jaw dropping rally of 2,770 focuses in July '13. In spite of the fact that record swayed between red and green throughout generally part, however drained bulls couldn't withstood the force to close beneath 23,300 level. Sharp disintegration in quality of PKR, presidential decision and absence of agreement over vigor strategy debilitated guru conclusions. Road's desire hit the winning yet missed payout desire for FFC (Pkr3.75/share) as stock shut in the green zone. After a week ago progression in the concrete part, bellwether stocks were covered in red, falling prey to pioneer play. Consequence identified movement and outside streams to direct drift at the bourse.

FFC reported 1HCY2013 PAT of PKR = 9.5bn (EPS PKR = 7.46) indicating a YoY decrease of 8%. The organization likewise proclaimed a between time money yield of PKR = 3.75 / Share. Income were all in all in accordance with our projections while payout was somewhat higher than desire. 2QCY 2013 income stood at PKR = 3.60 / Share indicating a 7% QoQ dip, generally attributable to the fall in other livelihood going out of FFBL yield nonappearance. This decrease offset the positive impact of the expansion in the volumes of urea that brought about a 10% QoQ build in incomes. Going advance, with powerful allotment payout of 97% throughout 1HCY 2013 proclaimed by the organization, the capital structure of the organization is sure to be obligation slanted with further money outpouring relating to AKBL's correct issue continues.

At current value we have a Buy stance on the scrip, however ascent in gas tax remains a key hazard for the organization which can imprint the organization's gainfulness and expedite descending update in income & TP.

Fauji Fertilizer Company (FFC) has advertised income of Rs. = 4.6bn (EPS of Rs. = 3.60) in 2Q 2013, down 29%YoY in the same period a year ago. As well as the outcome, the organization likewise reported a second break money payment of Rs. = 3.75 / Share. The outcome was marginally above our desire, particularly the yield payout which checked up at 104% in 2Q 2013. To review, this is notwithstanding the first interval money share of Rs3.5 / Share, which makes as a 1H 2013 payout of Rs. = 7.25 / Share (97%) which repudiates advertise feelings of trepidation of trimmed 2013e payout owing to AKBL transaction.

Above wanted 2Q income are essential attributable to 1) more level than needed fund expense and 2) higher than needed other livelihood. Aggregately, the organization reported profit of Rs.= 9.5bn (EPS of Rs. = 7.46) in 1H 2013, down 8%YoY. The income are down on a YoY support because of more level urea costs compared to the last year.

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