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Karachi, August 01, 2012 (PPI-OT): As per data released by NFDC, urea offtake for 1HCY12 stood at 2.75 million tons, up by modest 3%YoY. 1HCY12 offtake turned out to be highly skewed towards Jun’12 as urea offtake of 1.03 million tons in Jun’12 alone accounted for 37% of 1HCY12 sales.
According to AKD Securities, higher offtake in Jun’12 was the result of pre-buying by dealers who tried to capture price arbitrage on pre-announcement of partial price restoration and anticipation of another price increase due to proposed imposition of GIDC in Jul’12. Moreover, piled up urea inventory over 5MCY12 ensured this sizeable level of urea offtake. FFC was one of the largest beneficiaries, as it secured urea offtake of 526.4k tons during Jun’12, up by 157%YoY. Moreover, FATIMA was able to offload 127.7k tons during Jun’12, up by massive 237%YoY, primarily on the back of dealer incentive driven strategy. Industry DAP offtake for 1HCY12 stood at 269k tons, down by 15%YoY as farmers’ purchasing power hit a low following the surge in input prices (fuel, seed etc) and dip in output prices (particularly cotton price). FFBL managed to sell 42.3k tons of DAP in Jun’12, down by 6%YoY, as dealers’ focus remained on nitrogenous fertilizers. In Jul’12, AKD Securities estimates decent fertilizer offtake, primarily driven by pending order in Jun’12. That said, the fertilizer sector is still clouded by uncertainties as rumours of another 600k tons of urea import and reduction in imported urea price by PKR 150/bag surround the outlook of fertilizer industry. Nevertheless, AKD Securities retains AKD Securities’ liking for FATIMA and FFC, providing 57% and 23% upside to AKD Securities’ Dec’12 TP of PKR 39 and PKR 145, respectively, while AKD Securities has a Neutral stance on FFBL.
| Fertilizer offtake Jun’12 | ||||||
| (000 tons) | 116CY12 | 1HCY11 | Y/Y | Jun’12 | YoY | MoM |
| Urea |
2,749 |
2,679 |
3% |
1,029 |
109% |
173% |
| CAP |
269 |
316 |
-15% |
96 |
41% |
269% |
| Company wise offtake | ||||||
| Urea | ||||||
| FFC |
1,134 |
1,232 |
-8% |
526 |
157% |
158% |
| FFBL |
140 |
260 |
-46% |
61 |
24% |
18% |
| ENGRO |
174 |
491 |
-65% |
223 |
85% |
247% |
| FATIMA |
170 |
58 |
191% |
128 |
237% |
nm |
| DAP | ||||||
| FFBL |
110 |
158 |
-31% |
42 |
-6% |
149% |
| ENGRO |
61 |
95 |
-56% |
22 |
-5% |
-35% |
| Other products | ||||||
| FATIMA (CAN) |
185 |
49 |
277% |
52 |
385% |
197% |
| FATIMA (NP) |
88 |
7 |
nm |
30 |
nm |
55% |
Company wise performance review is provided below:
FFC: FFC sold 526.4k tons of urea during Jun’12, up 157.7%YoY. Higher offtake in Jun’12 was the result of pre-buying by dealers who tried to capture price arbitrage on pre-announcement of partial price restoration and anticipation of another price increase due to proposed imposition of GIDC during Jul’12. As per industry sources, FFC has sold 150k tons of urea till Jul 25’12, primarily due to realization of pending orders.
FFBL: Following FFC’s trend, FFBL sold 61.1k tons of urea in Jun’12, up 24%YoY. However, DAP offtake for 1HCY12 remained subdued at 110k tons, down 38%YoY, with significant closing inventory of 158k tons at Jun’12. As per AKD Securities’ industry sources, FFBL has sold 17k tons of urea and 49k tons of DAP till Jul 25’12.
FATIMA: Being largely silent on the urea front in May’12, FATIMA managed to sell 127.5k tons of urea in Jun’12, primarily driven by dealer incentive strategy. A remarkable increase in CAN and NP offtake was also recorded during Jun’12 with sales of 82.3k tons and 30.5k tons, respectively, amidst price cuts and substantially higher spending on marketing. In Jul’12, AKD Securities expects a significant offtake surge in NP.
ENGRO: Inline with industry trend, ENGRO registered urea offtake of 222.5k tons in Jul’12, up 85%YoY. Moreover, imported DAP sale was recorded at 21.9k tons, down 5%YoY.
Investment Perspective: Risks to the AKD Fertilizer Universe emanate from potential further import of 600k tons urea and reduction in imported urea price by PKR 150/bag, as suggested by Mol. Within AKD Securities’ coverage cluster, AKD Securities retains AKD Securities’ liking for FATIMA and FFC, which are offering significant upsides of 57% and 23% to AKD Securities’ Dec’12 TPs of PKR 39/share and PKR 145/share, respectively. Buy!