IGI Securities Limited – Day Break

Karachi, June 27, 2018 (PPI-OT): Fertilizer – May-18: Slowdown in urea demand; offtake down by 5%YoY

As per the latest available data by NFDC for the month of May-18, urea offtake posted growth of +32%MoM to 494k tons; however, on yearly basis witnessed decline of5% owing to demand slowdown amid water crisis andincrease in prices by manufacturers following removal of subsidy.

For DAP, offtake witnessed a decline of 14%MoM/14%YoY to 59k tons with total offtake for 5MCY18 relatively flat at 477k tons.

We expect demand during the month (Jun-18) to witness sluggish growth amid ongoing water crisis. In addition, with inventory reaching at low levels relative to last year and in the preceding month, possibility of price hike cannot be ruled out.

We have a “BUY” call on EFERT, based on our Dec-18 target price of PKR 84.3/share, offering +14% upside from its last closing. The company is currently trading at CY18E P/E of 8.9x and offers a dividend yield of 9.4%.

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IGI Securities Limited – Day Break

Karachi, June 27, 2018 (PPI-OT): Fertilizer – May-18: Slowdown in urea demand; offtake down by 5%YoY

As per the latest available data by NFDC for the month of May-18, urea offtake posted growth of +32%MoM to 494k tons; however, on yearly basis witnessed decline of5% owing to demand slowdown amid water crisis andincrease in prices by manufacturers following removal of subsidy.

For DAP, offtake witnessed a decline of 14%MoM/14%YoY to 59k tons with total offtake for 5MCY18 relatively flat at 477k tons.

We expect demand during the month (Jun-18) to witness sluggish growth amid ongoing water crisis. In addition, with inventory reaching at low levels relative to last year and in the preceding month, possibility of price hike cannot be ruled out.

We have a “BUY” call on EFERT, based on our Dec-18 target price of PKR 84.3/share, offering +14% upside from its last closing. The company is currently trading at CY18E P/E of 8.9x and offers a dividend yield of 9.4%.

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