Analyst:

Muhammad Sarfraz Abbasi

Sarfraz.abbasi@atlascapital.com.pk

Summit Capital Update Pulse March 2, 2011

(+92-21)-111-226-100 Ext 404

(Formerly Atlas Capital Markets (Pvt.) Limited)

HOLD
farmers in time to meet with their Kharif crop
Fertilizer Sector: Offtake dropped by requirements.
22% YoY… Outlook and recommendations…
Market Snapshot
Index Chg %
Synopsis… As the per the latest deal finalized by the GoP, urea will KSE 30 11310.68 370.00 3.38
The National Fertilizer Development Center (NFDC) has be imported at the price of US$408 per ton translating KSE 100 11608.43 319.20 2.83
Pakistan Research

revealed monthly production and offtake numbers for into local price per bag of PKR1,750. Whereas in the KSE ALL 8069.24 214.00 2.72
January 2011. As per the data, urea offtake recorded a local market it is selling at a price of PKR1,020. We
decline of 28% YoY to 394k tons against 546k tons during believe, local producers even after incorporating
the month of Jan’10 whereas DAP offtake also went impact of US$80 per ton (PKR378 per bag) are selling
down by 36% to 59k tons against 92k tons in Jan’10. On urea at a discount of PKR352 per bag. This gap Key Data
MoM, urea and DAP offtake declined by 37% and 35% between prices of locally producers urea and imported
respectively. The decline was mainly due to lower urea ensures space for the further hike in local market. 12M Avg. Volume (m) ENGRO 1.896
12M Avg. Volume (m) FFC 1.188
demand for Rabi season and higher offtake in Dec ’10 Our recommended scrips from the sector FFC and FFBL 12M Avg. Volume (m) FFBL 3.576
on account of anticipated inventory gains by dealers. are currently trading at a price levels where our 12M Avg. Volume (m) DAWH 0.54
Total production of fertilizer stood at 348k tons in Jan’ 11 suggestion is to HOLD. Our DCF based target price for
which is 14% lower than Jan ’10 when total production FFC and FFBL is PKR123 and PKR41 respectively.
was recorded at 405k tons due to gas curtailment for 45 12M relative performance vs KSE
days, consequently players suspended their operations. 150%
DAWH KSE-100
FFBL FFC
125% ENGRO

Industry Fertilizer Offtake

100%
(k tons) Jan-10 Jan-11 YoY
75%
UREA 546 394 -28% 50%
DAP 92 59 -36%

Apr-10

Aug-10
Feb-10

Oct-10

Feb-11
Mar-10

May-10

Jun-10

Sep-10

Nov-10

Dec-10

Jan-11
Jul-10
All Fertilizers 692 540 -22%
Source: NFDC, Summit Research

Latest happenings in the sector…

Kharif season sowing would start from the first week of
March ‘11 and for this to ensure the availability of the
urea government has been in dialogues with local
fertilizer producers and importers for the import of about
225k tons of urea. However, as per the news reports,
TCP has finalized the deal with M/s Gavilon Fertilizer LLC Summit Capital (Pvt.) Ltd
USA for the import of 100k tons of urea at a price of $408 B-209, Park Towers, Clifton, Karachi
per ton (translating into local per bag price PKR1,750). Equity Research: Equity Sales:
In addition to this, the government has also entered into Tel: 92 (21) 5376125 Tel: 92 (21) 5368261-8
an agreement with SABIC for the supply 60k tons of Fax: 92 (21) 5376126 Fax: 92 (21) 5376122
urea. Supply from the SABIC is expected to start in a few Money Market: Corporate Finance:
days which would ensure availability of the urea to the Tel: 92 (21) 5376128 Tel: 92 (21) 5824991
Fax: 92 (21) 5376129 Fax: 92 (21) 5376122
farmers Allininformation
Disclaimer: time to meetin this
contained with their has
publication Kharif crop
been researched and compiled from sources believed to be accurate and reliable at the time
Financial Products Distribution:
of publishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, Summit Capital (Pvt.) Limited
Tel: 92 (21) 5376125
accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the publication. All information is
Fax: 92 (21) 5376126
provided without warranty and Summit Capital (Pvt.) Limited makes no representation of warranty of any kind as to the accuracy or completeness of any
information hereto contained.