Fauji Fertilizer Bin Qasim (FFBL) During the 9MCY13 overall fertilizer industry showed positive growth both in production and off take of urea. FFBL showed the opposite picture. However, as always, FFBL thrives in DAP. It now sells DAP at lower rates from last year. Hence it is volume player of DAP. Gas curtailment hits urea production During 9MCY13 urea market sales was increased by 13% to 4.2mn as compared to last years same period sales of 3.7mn tonnes. The domestic production of urea is 3.5 mn tonnes during 9MCY13 as compared to 3.1mn tonnes in corresponding period last year. Where in FFBL showed opposite scenario and sales of Sona urea was declined by 7% to 185,000 tonnes in 9MCY13 as compare to 198,000 tonnes sales in 9MCY12 which was mainly due to gas curtailment effecting the production. King of DAP remains king Whereas in DAP sales and production, FFBL is industry leader. During 9MCY13 industry, DAP off take stood at 743,000 tonnes, 19% higher than 623,000 tonnes of sales in 9MCY12. FFBL also reported 21% higher DAP sales of 442,000 tonnes in 9MCY13 as against 365,000 tonnes sales in corresponding period. This indicates DAP off take economics is very much price elastic and hence management realizes to sell at low price. FFBL charges market competitive prices for DAP and Urea, with price of Rs 1,770 per bag of Urea and Rs 3,300 per bag of DAP. Few changes in balance sheet; financial charges to balloon While analysing balance sheet it is observed that company rose its short term borrowing from Rs9.2 bn in Dec 2012 to Rs16.3 bn in September 2013 which is due to financing the inventory which is almost double at the end of September compared to Decembers ending inventory, which raises the question mark for the upcoming financial results and earnings may be hampered due to upfront financial charges to be seen in the year end books. Sharia compliance question mark The increasing debt portion also shaking the Sharia compliance investors in FFBL and we are neutral regarding FFBL. Profits and dividend FFBL reported net profit of Rs 3.3bn (EPS Rs 3.53) for 9MCY13 up by 55% against corresponding period net profit of Rs 2.13bn (EPS Rs 2.28). FFBL paid dividend of Rs2.75 during 9MCY13. However, we see concerns in final quarter as far as dividend paying capacity is concerned since we see cash constraints to hit FFBL hard. Analyst: Rajesh Kumar Maheshwari scstrade
Posted on: Wed, 20 Nov 2013 04:27:31 +0000
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