May 3, 2012
Pakistan''s urea sales soar 64%
Pakistan''s National Fertilizer Development Centre (NFDC) has unveiled fertiliser production and offtake figures for March 2012.
As per data, the urea offtake during March rose by 64% MoM to 263 k tonnes, while on a YoY basis, this figure was lower by 38%. The improvement in sales is mainly due to a reduction in subsidy on imported urea to the tune of INR300/bag (US$5.66) and resumption of gas supply to plants on the Sui networks during the first half of the month.
Urea sales during 1QCY12 declined by 16% YoY to 1,033 k tonnes. This lower offtake can be attributed to winter gas curtailment and availability of subsidised imported urea in the market. Meanwhile, average urea retail price in March 2012 were recorded at INR1,797/bag (US$33.92), which is 58% higher than the average price in Mar-11.
DAP sales in Mar-12 soared by 283% MoM (by virtue of a low base effect) to 46 k tonnes. This figure is higher by 39% on a YoY basis. Sales of the product in 1QCY12 declined by 46% YoY to 87 k tonnes, as the country''s major producer (FFBL) had to keep operations suspended for the majority of the period owing to gas curtailment.
A 24% YoY increase in average DAP prices during the period also proved detrimental to sales. DAP prices during Mar-12 were recorded at INR4,044/bag (US$76.34). Mar-12 closing inventory of DAP stood at 177k tonnes (of which 66 k tonnes are of locally produced DAP).
The National Fertilizer Marketing Limited (NFML) held the lion''s share of total urea offtake during 1QCY12, and stood at 48%. Fauji Fertilizer Company Limited (FFC) was the best performer amongst local producers, and managed to capture 32% of the market share. A combination relatively minor gas curtailment and strong sales network is the primary reason behind this superior performance.
Engro Corporation''s (Engro) market share meanwhile stood at 8% and is a direct result of suspension of gas supply to its Enven plant. Fauji Fertilizer Bin Qasim''s (FFBL) and Fatima Fertilizer Limited''s (FATIMA) urea market share stood at 1% and 4% respectively.
Being the only fertiliser company of note which has (thus far) reported a profit during 1QCY12, and offering an upside potential of 18% to our DCF based Dec-12 target price of INR144.9/share (US$2.74) from last closing price, we maintain our outperform stance on the scrip.
The stock is trading at CY12 PER and dividend yield of 7.2x and 12.2%, respectively.