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Fortune Securities Limited | Equity Research
EFERT expected 3QCY15E EPS: PKR 2.18
BoD of Engro Fertilizer Limited (EFERT) is scheduled to announce 3QCY15 results on
26th
Oct’15. We expect the company to post profit after tax of PKR 2.904bn (EPS:
PKR 2.18), an increase of just 36% YoY, mainly due to availability of concessionary
gas on the new plant this year. The increased profitability this quarter ‘would’ have
been further enhanced had the volumetric off‐take of Urea, DAP, NP and NPK not
suffered due to a mix of factors including increased urea prices and delayed
implementation of subsidy announced by the government on phosphate fertilizers.
We expect the company will post urea sales of 400k tons for 3QCY15, a decrease of
16% compared to the same period last year. DAP Off‐take is expected to be
approximately 35k tons, a decrease of 66% compared to 104k tons imported off‐
take of Eximp’s DAP business (now a part of EFERT) in 3QCY14. Similarly, we expect
EFERT to post NP and NPK off‐take of 8k and 7k tons for 3QCY15, a fall of 57% and
29% YoY respectively. As the subsidy has been implemented last week we expect
DAP, NP and NPK sales to increase significantly in the coming months.
EFERT’s gross margins are expected to clock in at 42%, an increase of 5% against
37% in 3Q CY14. The increase is partially explained by concessionary gas to Enven,
which we have assumed is being utilized to more than 80% of its current capacity.
Furthermore, weak sales of DAP have not driven up the COGS of the company.
Lower financial charges on debt due to a favorable interest rate environment have
also contributed to the bottom line. We have a favorable stance on EFERT and a
target price of PKR 106.30 / share.
Fertilizer
EFERT ‐ Result Preview 3QCY15
22nd
Oct, 2015
Fortune Securities Ltd.
BUY
Current Price PKR: 91/share
Target Price PKR: 106.30/share
Upside: 17%
Dividend Yield: 8%
Aijaz Siddique
+92‐21‐35309112
aijaz.siddique@fortunesecurities.com
Key Financials (PKR’mn) 3QCY15E 3QCY14A YoY 9MCY15E 9MCY14A YoY
Sales 15,615 16,035 ‐3% 53,674 43,692 23%
Cost of Sales 9,086 10,067 ‐10% 33,055 28,280 17%
Gross Profit 6,530 5,968 9% 20,620 15,412 34%
GP Margin 42% 37% 38% 35%
Operating Profit 4,884 4,788 2% 16,363 10,914 50%
Operating Margin 31% 30% 30% 25%
Finance Cost 1272 1894 ‐33% 3668 4962 ‐26%
PBT 4,149 3,270 27% 13,674 8,173 67%
Tax 1,245 1,133 10% 3,654 2,662 37%
PAT 2,904 2,137 36% 10,020 5,511 82%
EPS (PKR) 2.18 1.62 7.53 4.18
Source: Company Accounts, Fortune Research
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Offtake 3QCY15E 3QCY14A YoY
Urea 400,440 478,685 ‐16%
DAP 35,048 104,336 ‐66%
NPK 7,643 17,592 ‐57%
NP 6,755 9,518 ‐29%
Source: NFDC, Fortune Research