Karachi, November 03, 2021 (PPI-OT): Pakistan Fertilizer FFBL – A bumper year

We revisit our investment case on Fauji Fertilizer bin Qasim Limited (FFBL) where we expect the company to witness a bumper year as the DAP price momentum is likely to continue into 1QCY22.

Based on the aforementioned bull cycle, we incorporate average DAP primary margins for FFBL at US$136/MT for CY21, which are expected to normalize to US$100/77 per MT in CY22/23F as supply disruptions smoothen out.

With Rabi season kickoff, we expect the DAP offtake in 4QCY21 to exceed 300k MT and urea offtake to hover around ~160k MT, taking the CY21 cumulative DAP and Urea offtake to ~825k MT and ~540k MT respectively.

In addition to this, the company has significantly reduced its debt (D/A ratio of 0.36 in 9MCY21) which shall keep the investor interest upbeat owing to reclassification to the list of Shariah Compliant scrips. We reiterate our Buy stance on FFBL with Dec’22 target price of PkR42/sh, implying an upside of 59% from the last close.