October
November
03,19,
2013
2013
Pakistan
Pakistan
Research
Research
| Fertilizers
| Fertilizers
Fauji Fertilizer Bin Qasim (FFBL)- Cash Constraints
FFBL Statistics
Avg Volume (52 Weeks)
1.20mn
Close
39.32
52 Weeks High
46.15
52 Weeks Low
35.9
Expected P/E(x)
8.33
Market Capitalization
36.73bn
Beta
0.68
Total No of Shares
934.11mn
Free-Float Shares
326.94mn
Source: SCS Research
Fauji Fertilizer Bin Qasim
Financials
(Rupees in mn)
9MCY13 9MCY12 Change
Net sales
33,781
29,208
16%
COGS
24,645
22,778
8%
Gross Profit
9,136
6,430
42%
Operating expenses
4,701
4,003
17%
Other income
399
695
-43%
NPAT
3,295
2,130
55%
EPS
3.53
2.28
55%
DPS
Source: Company announcement
“FFBL reported sales of Rs 33.78bn in 9MCY13 up
by 16% against Rs 29.21bn sales in 9MCY12. The
gross profit was increased by 42% to Rs 9.1bn in
9MCY13.”
“FFBL has also recorded Askari bank holdings in the
books showing the purchase of 175 million of
Askari bank shares in its book at cost of Rs 4.26bn.
We see financial turnaround in AKBL to benefit
FFBL in shape of dividends. “
Analyst:
Rajesh Kumar Maheshwari
During the 9MCY13 overall fertilizer industry showed positive growth
both in production and off take of urea. FFBL showed the opposite
picture. However, as always, FFBL thrives in DAP. It now sells DAP at
lower rates from last year. Hence it is volume player of DAP.
Gas curtailment hits urea production
During 9MCY13 urea market sales was increased by 13% to 4.2mn as
compared to last year’s same period sales of 3.7mn tonnes. The
domestic production of urea is 3.5 mn tonnes during 9MCY13 as
compared to 3.1mn tonnes in corresponding period last year. Where in
FFBL showed opposite scenario and sales of Sona urea was declined by
7% to 185,000 tonnes in 9MCY13 as compare to 198,000 tonnes sales
in 9MCY12 which was mainly due to gas curtailment effecting the
production.
King of DAP remains king
Whereas in DAP sales and production, FFBL is industry leader. During
9MCY13 industry, DAP off take stood at 743,000 tonnes, 19% higher
than 623,000 tonnes of sales in 9MCY12. FFBL also reported 21% higher
DAP sales of 442,000 tonnes in 9MCY13 as against 365,000 tonnes sales
in corresponding period. This indicates DAP off take economics is very
much price elastic and hence management realizes to sell at low price.
FFBL charges market competitive prices for DAP and Urea, with price of
Rs 1,770 per bag of Urea and Rs 3,300 per bag of DAP.
Few changes in balance sheet; financial charges to balloon
While analysing balance sheet it is observed that company rose its
short term borrowing from Rs9.2 bn in Dec 2012 to Rs16.3 bn in
September 2013 which is due to financing the inventory which is
almost double at the end of September compared to December’s
ending inventory, which raises the question mark for the upcoming
financial results and earnings may be hampered due to upfront
financial charges to be seen in the year end books.
Sharia compliance question mark
The increasing debt portion also shaking the Sharia compliance
investors in FFBL and we are neutral regarding FFBL.
Tell: 111-111-721 Ext.116
Profits and dividend
www.scstrade.com
FFBL reported net profit of Rs 3.3bn (EPS Rs 3.53) for 9MCY13 up by
55% against corresponding period net profit of Rs 2.13bn (EPS Rs 2.28).
FFBL paid dividend of Rs2.75 during 9MCY13. However, we see
concerns in final quarter as far as dividend paying capacity is concerned
since we see cash constraints to hit FFBL hard.
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