JS Securities Limited - JS Research Beep (February 09, 2023)

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JS Securities Limited – JS Research Beep (February 09, 2023)

February 9, 2023

Karachi, February 09, 2023 (PPI-OT): FFBL: Corporate briefing session key takeaways

Fauji Fertilizer Bin Qasim Limited (FFBL) held its corporate briefing yesterday to discuss the CY22 results and outlook. To recall, company for CY22 reported unconsolidated earnings of Rs2.3bn (EPS Rs1.8), decline of 64% YoY. For 4QCY23, company reported profitability of Rs615mn (EPS Rs0.48), down by 156% YoY. On a consolidated level, FFBL posted an EPS of Rs5.92 for CY22, a 15% YoY decline. We present key takeaways from the briefing session.

During the year, finance cost for the company increased by 120% YoY to Rs5.1bn in tandem with rising interest rates whereas other income clocked in lower due to lower than expected dividend income from subsidiaries. To recall, the company also faced an exchange loss of Rs4.8bn during 9MCY22. Additionally, the business incurred a hefty super tax charge in June-22 totaling Rs2.7bn. Impairment charge of Rs1.2bn during the last quarter was also a major reason for dampened earnings for the year.

Management shared that despite an overall reduction in the DAP demand, the company was able to increase its market share for DAP taking it to 56% from 42% last year as it was able to increase production by 7% YoY (highest ever at 848k tons) due to relatively improved gas availability during the year.

The market for DAP shrank by 38% YoY during CY22 as offtake for the outgoing year clocked in at 1.17mn tons. Management expects the offtakes for the product to get to 1.5mn tons/annum going forward.

Phosphoric acid pricing for 1QCY23 is anticipated to be set at US$1,025/ton based on preliminary estimates. To recall, the cost of phos-acid for 4QCY22 was around US$1,175/ton whereas for 3QCY22 it clocked in at US$1,715/ton.

Management shared the present Coal mix of Fauji Power Company Limited (FPCL) which comprises of 30% thar coal whereas the rest of the 70% comes from international coal. The company plans to slightly increase the quantum of local coal in its mix.

The management shared that although Fauji Food Limited (FFL) posted a loss for the year, the company did show revenue growth of 44% YoY during the outgoing year. Fauji Group considers FFL as one of the key businesses and hence decided to make an equity injection of Rs11bn into the business during CY22.