IGI Securities Limited – Day Break

Karachi, May 23, 2018 (PPI-OT): Fertilizer – EFERT: Earnings revised post-budget; “BUY” call intact

We revisit our investment case on the scrip, wherein we have revised our earnings estimates upwards after incorporating budgetary measures, 1QCY18 financial accounts and changes in our pricing assumption.

For the 1QCY18 the company recorded impressive growth in its earnings attained at PKR 3.89bn (EPS: PKR 2.91) led by healthy offtake in urea and DAP along with improved retention prices.

With respect to budgetary measures decrease in tax rates and corresponding removal of subsidy will serve to bode well in easing down receivables while giving manufacturers advantage over pricing power (as can be signaled from the recent price increase of PKR~100/bag in urea).

Taking all the aforementioned measures in to account will result in our revised earnings estimates of PKR (8.28/8.79/9.10)/share for CY18E/CY19F/CY20F.

We prefer EFERT as our top pick in IGI Fertilizer universe with our revised Dec-18 target price of PKR 84.3/share offering +13% upside from its last closing. The company is currently trading at CY18E P/E of 9.1x and offers an attractive dividend yield of 9.3%.

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IGI Securities Limited – Day Break

Karachi, May 23, 2018 (PPI-OT): Fertilizer – EFERT: Earnings revised post-budget; “BUY” call intact

We revisit our investment case on the scrip, wherein we have revised our earnings estimates upwards after incorporating budgetary measures, 1QCY18 financial accounts and changes in our pricing assumption.

For the 1QCY18 the company recorded impressive growth in its earnings attained at PKR 3.89bn (EPS: PKR 2.91) led by healthy offtake in urea and DAP along with improved retention prices.

With respect to budgetary measures decrease in tax rates and corresponding removal of subsidy will serve to bode well in easing down receivables while giving manufacturers advantage over pricing power (as can be signaled from the recent price increase of PKR~100/bag in urea).

Taking all the aforementioned measures in to account will result in our revised earnings estimates of PKR (8.28/8.79/9.10)/share for CY18E/CY19F/CY20F.

We prefer EFERT as our top pick in IGI Fertilizer universe with our revised Dec-18 target price of PKR 84.3/share offering +13% upside from its last closing. The company is currently trading at CY18E P/E of 9.1x and offers an attractive dividend yield of 9.3%.

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