IGI Securities Limited – Day Break

Karachi, March 25, 2019 (PPI-OT): Fertilizer – Feb-19: Strong demand keeping urea offtake afloat; inventory closing at 54k tons

As per the latest available data by NFDC for the month of Feb-19, urea offtake rose by +5%YoY to 388k tons. On a sequential basis, offtake was down by 31%MoM owing to high base effect. For 2MCY19, total industry offtake inched down by 2%YoY to 834k tons.

For DAP, offtake witnessed a significant decline of 60%YoY to 49k tons owing to price increase following PKR depreciation. On a cumulative basis for 2MCY18, total industry sales have gone down by 42%YoY to 124k tons.

We expect demand for urea to remain intact with Kharif season approaching. While other manufacturers haven’t increased prices yet, we believe distributors will resort to pre-buying in anticipation of further price hike. For DAP, subdued demand and weak offtake will pose rather challenging situation for FFBL

We have a “BUY” call on EFERT, based on our Dec-19 target price of PKR 80.2/share, offering +11% upside from its last closing. The company is currently trading at CY19E P/E of 6.00x and offers a dividend yield of 15.3%.

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