AKD Securities Limited - Off the Analyst's Desk (February 07, 2023)

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AKD Securities Limited – Off the Analyst’s Desk (February 07, 2023)

February 7, 2023

Karachi, February 07, 2023 (PPI-OT): FFC: CY22 Analyst Briefing Takeaways

Fauji Fertilizer Company (FFC) held its analyst briefing today, where it apprised investors on the year ended Dec’22 along with its future outlook. The company posted unconsolidated earnings of PkR20.0bn in CY22, culminating into an EPS of PkR15.8. While on the consolidated basis, earnings for the year amounted to PkR33.7bn (EPS: PkR27.0) in CY22.

Offtakes for the company clocked in at 2,423k tons for Urea and 70k tons for DAP, declining by 2%/66% compared to CY21. Furthermore, FFC has recorded a 37% market share for Urea in the country while posting 6% market share for DAP.

Gross margins in 4QCY22 fell to 32% vs. 33% posted in the SPLY, while declining considerably from the 39% recorded last quarter as inventory losses on DAP amounting to PkR1.5bn dented the margins.

The management apprised that the new project undertaken with MARI for the enhancement of gas pressure is expected the cost the company US$150mn over the next 3 years, after which smooth gas supply will be ensured for the next 5-7 years.

Similarly, the company is ensuing another project with SNGP for a pipeline to be completed in the next 2 years. This will cost the company PkR2bn and will ensure a backup supply for the next 14 years.

As majority CAPEX for the company is dollarized, the management stated that performance in dollarized terms is quite important for the company. With regards to the severe devaluation of the local currency, NPAT for CY22 has declined by 27%YoY in US$.

Moreover, due to the crisis of FX reserves in the country, the company is facing issues in the opening for LCs of DAP, although the company is not looking to import the nutrient as of writing, as the demand for DAP has been severely dented on the back of surging prices for the nutrient.

FCCEL supplied 89.5GWh of electricity to the grid, and recorded a net profit of PkR2.5bn for the year. The FWEL projects sold a combined 220.8GWh of electricity and recorded earnings of PkR6.3bn. FFF has commenced production on a new line in June, and the management expects the company to turn profitable in CY23, further boosting earnings.