Morning Briefing for January 28, 2014 – Standard Capital

Karachi, January 28, 2014 (PPI-OT): Fauji Fertilizer Company- Result preview

FFC: CY13 earnings to swing around Rs17.5/sh

According to Standard Capital, fauji Fertilizer Company (FFC) to announce its financial statements for CY13 on 29th January 14. Standard Capital expects earnings for CY13 will be swinging around Rs 17.5/sh for the CY13 against Rs 16.4/sh. Based on company’s payout policy Standard Capital expects that company may announce Rs 4.5/sh cash dividend, this will be addition to interim cash dividend of Rs 11.35/sh making cumulative full year cash dividend of Rs 15.85/sh (92% payout ratio).

Company may report net sales of Rs 81.75bn for CY13, up by 10% against corresponding period sales of Rs 74.32bn, the increase in sales is mainly due to growth in volumetric sales and price increase of Urea and DAP products. Beside gas curtailment and other issues Standard Capital expects FFC will be managing its gross profit margin around 48% and may report gross profit of Rs 39.2bn for CY13 against Rs 36bn in same period last year (SPLY)

Fauji Fertilizer Company
Profit & Loss account

(In Million Rs)        CY12A      CY13E     CY14E     CY15E
Net Sales              74,323     81,755    87,478    90,102
Cost of Sales          38,324     47,261    46,169    45,620
Gross profit           35,998     39,242    42,427    43,519
GP Margin               48.4%      48.0%     48.5%     48.3%
Distribution Cost       5,561      7,124     8,142     9,072
Finance Cost              999        715       715       715
Other Expenses          2,685      2,616     2,799     2,883
Other Income            4,268      4,481     4,705     4,941
Profit before tax      31,021     33,269    35,475    35,789
Provision for taxation 10,181     11,311    12,062    12,168
Net Profit after tax   20,840     21,957    23,414    23,621
EPS                      16.4       17.3      18.4      18.6
DPS                      14.5       15.9      17.5      17.6

Valuation: –

Based on Standard Capital’s expected EPS of Rs 17.3 and DPS of 15.85/sh for CY13, FFC yield PE of 6.7x and dividend yield of 14% for CY13. And for the future perspective FFC yield PE of 6.3x and 15% dividend yield for CY14 and CY15. Standard Capital maintains HOLD stance for FFC being a most defensive stock.

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