Karachi, September 27, 2021 (PPI-OT): Pakistan Fertilizer: Rabi season triggers uptrend in offtakes

As per the numbers released by NFDC, urea offtake increased 4/13% MoM/YoY to 648K MT. The fertilizer numbers are on an uptrend given onset of Rabi season. This takes 8MCY21 urea offtake to 4.1mn MT, up 9%YoY, with increase in offtake more concentrated in 1HCY21 due to low base effect. Urea price, already up by c. PkR125/bag FYTD to PkR1,725/bag may sustain over 2HCY21 atleast, given supply side hiccups.

DAP offtake increased 30%MoM, but posted a decline of 37%YoY to 186K MT, taking 8MCY21 DAP offtake to 855K MT, down 25% YoY mostly due to a sharp increase in international DAP prices. DAP inventory in Aug’21 closed at 380K MT, up 40% YoY, where FFBL accounts for ~40% of industry inventory, as inclining prices has rendered imports difficult for FFC and EFERT.

EFERT offers highest D/Y in the sector where CY22/23F D/Y stands at 16.7/15.3% at last close, despite incorporating non-concessionary rates 3QCY21 onwards. For FFBL, strong profitability in 2HCY21 as well as one-time impact of conclusion of sell-off transaction of wind power projects will trigger price performance.