Karachi, June 28, 2013 (PPI-OT): As per 26-days provisional fertilizer off take available with us, extrapolated to 30 days, urea sales were meagrely up 2% MoM to stand at 493k tons in Jun’13.
According to Arif Habib Limited however, this figure is down 52% on a YoY basis due to high-base of Jun’12 sales. During 1HCY13, the cumulative sales declined 4% YoY. FFC and FFBL’s urea off take plunged by 20% MoM to stand at 212k tons, while ENGRO sales were down 15% MoM to 104k tons. On the other hand, FATIMA’s sales doubled MoM to 60k tons in Jun’13. NFML’s sales in the month of Jun-13 also recovered and clocked in at 90k tons, surging by a huge 185% MoM.
The decline in the urea off take is due to high-base effect of Jun’12, which was due to piled up inventories by all the manufacturers, and they offloaded it in Jun`12 with some discounts as well. Currently, as there is no massive pile-up inventory of urea with the local producers, they only managed to sell at their maximum operational capacities for a month. Closing inventory of urea available with the local producers, as of 26-Jun- 13, stood at 99k tons while total urea closing inventory (both local and imported) was recorded at 227k tons.
Fertilizer off take (Ktons) Jun-13 Jun-12 YoY May-13 MoM 1HCY13 1HCY12 YoY Urea 493 1,029 -52% 485 2% 2,633 2,747 -4% DAP 104 96 8% 80 30% 377 269 40% CAN 60 117 -48% 62 -3% 244 248 -1% NP 22 52 -58% 40 -46% 161 174 -8% Company off take (Ktons) Jun-13 Jun-12 YoY May-13 MoM 1HCY13 1HCY12 YoY Urea FFC and FFBL 212 587 -64% 266 -20% 1,295 1,274 2% ENGRO 104 223 -53% 123 -15% 575 397 45% FATIMA 60 128 -53% 30 100% 170 170 0% NFML 90 67 34% 32 185% 491 770 -36% DAP FFBL 63 42 50% 54 18% 244 110 122% ENGRO 20 22 -9% 13 51% 66 101 -35% Source: AHL Research
DAP sales up 30% MoM, 40% YoY in 1HCY13
DAP’s sales surged 30% MoM to stand at 104k tons in Jun’13, while during 1HCY13, DAP sales jumped 40% YoY. FFBL managed to sell 63k tons of DAP in the month of Jun-13, up 18% MoM and substantial 122% YoY in 1HCY13. ENGRO’s DAP sales also showed enormous improvement with 51% MoM increase to stand at 20k tons whereas cumulative sales during 1HCY13 were still down 35% YoY. As per Arif Habib Limited discussions with industry, DAP sales for Jun`13 were on targets as set by the companies. DAP closing inventory as of 26-Jun-13 recorded at 274k tons (FFBL and ENGRO held ~144k and 24k tons, respectively).
CAN and NP sales slowdown by 3% and 46% MoM, respectively After showing continued positive growth, CAN sales declined with 3% MoM in Jun’13 while 1% YoY in 1HCY13, to stand at 60k tons in Jun’13. NP sales in the month on Jun-13 was recorded 22k tons, huge decline of 46% MoM while the cumulative sales were down 8% YoY during 1HCY13. The closing inventory of CAN as of 26-Jun-13, recorded at 52k tons.
Initial earnings estimates and recommendation
With these provisional off take figures, Arif Habib Limited expects FFC, FFBL and ENGRO to post EPS of PKR 3.75, PKR 2.05 and PKR 0.42, respectively for 2QCY13. However, these estimates are based on provisional off take numbers and are subject to adjustments once the final off take figures become available.
Scrips 2QCY13 1QCY13 QoQ 2QCY12 YoY 1HCY13 1HCY12 YoY T.P Upside FFC 3.75 3.86 -3% 5.08 -26% 7.61 8.12 -6% 129 19% FFBL 2.05 0.53 287% 1.10 86% 2.58 0.69 274% 46 21% ENGRO 0.42 0.60 -30% (0.29) n.m 1.02 (1.61) n.m 206 69% Source: AHL Research
Currently, Arif Habib Limited has a ‘Buy’ recommendation on FFC, FFBL and ENGRO with Dec-13 price objectives of PKR 129/share, PKR 46/share and PKR 206/share, respectively.