JS Securities Limited – Morning Briefing

Karachi, June 27, 2018 (PPI-OT): Fertilizers: Urea sales took a breather, down by 5% YoY in the month of May

National Fertilizer Development Corporation (NFDC) released fertilizer numbers for May-2018, wherein local urea sales depicted a slight attrition of 5% YoY to clock-in at 494k tons, in-line with our estimates.

Cumulative sales for 5M2018 remained impressive, where industry offtake clocked-in at 2.1mn tons as compared to 1.6mn tons in the corresponding period last year, up by a healthy 29% YoY.

Fauji Fertilizer Bin Qasim Limited (FFBL) and Fauji Fertilizer Company (FFC) outperformed peers, with growth of 15% YoY and 14% YoY respectively, during the month. However sales of Engro Fertilizer Limited (EFERT) declined, albeit by a mere 2% YoY.

DAP sales during May-2018 dropped by 15% YoY to 69k tons, also in-line with our estimates. EFERT remained the star performer in the DAP segment, posting sales growth of 166% YoY. On the other hand, FFBL’s DAP offtake witnessed attrition of 56% YoY.

Inventory levels of both urea and DAP remained at comfortable levels, clocking-in at 329k tons and 387k tons, respectively.

Urea offtake depict some glitches

National Fertilizer Development Corporation (NFDC) released fertilizer numbers for the month of May-2018 wherein local urea sales depicted a drop of 5% YoY, although on monthly basis, industry urea off-take posted a healthy growth of 32% MoM. Historical analysis of preceding 5 years suggests that average sales in the said period had remained at ~433k tons which implies a growth of 14%. Cumulative sales for 5M2018 remained impressive, where industry offtake clocked-in at 2.1mn tons as compared to 1.6mn tons; up by 29% YoY. With upbeat urea offtake and lower average along with average lower production levels of 425k tons, inventory levels of the industry are hovering in a sweet space; clocking-in at 329k tons; down by 81%YoY from 1.7mntons.

FFC and FFBL lead the way

Further dissecting the data, Fauji Fertilizer Company (FFC) outperformed the industry with 15% YoY higher offtake to 257k tons during May-2018, followed by Fauji Fertilizer Bin Qasim Limited (FFBL), which witnessed an improvement of 14% YoY to 60k tons. On the other hand, sales of Engro Fertilizers Limited (EFERT) and FATIMA Fertilizers Limited (FATIMA) posted an attrition of 2% YoY and 47%YoY to 137k tons and 39k tons, respectively. Cumulatively for 5M2018, FFBL outperformed its peers, depicting a growth 79% YoY to 199k tons. On the other hand, sales from both plants of FATIMA clocked around 153k tons, down by a massive 42%YoY.

DAP sales are expected to depict some glitches

DAP offtake in the month of May-2018 decline by 15% YoY to 59k tons as compared to 69k tons in the corresponding period last year. FFC and FFBL witnessed declines of 63% YoY and 56% YoY, respectively to 12k tons and 8k tons, while sales of EFERT jumped by 166% YoY. On cumulative basis, during 5M2018, offtake in the said segment continues to remain slightly on the positive side with sales increasing by 3% YoY to 492k tons as compared to 478k tons in the same period last year.

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