Friday, January 24, 2014 Bloomberg code: Price Target: Last Close: Recommendation:

52w Avge Daily Vol (mn shares) 52w Avge Daily Turnover (USD mn) Market Capitalization (PKR mn) Market Capitalization (USD mn) Shares Outstanding (mn) Index Weightage (%) Free Float (%) Daily Summary Equities
Turnover All Shares (mn) 399.93 383.01 16.92 3-month 9.975 Market Cap All Shares (PKR bn) 6,615.97 6,582.68 33.29 6-month 10.125
Company

DAY BREAK
FFBL to post CY13 PAT of PKR 5.70bn (EPS: PKR 6.10)
n

FFBL PA PKR 48.00 PKR 43.93 BUY

1.22 0.49 41,381.07 392.61 934.11 1.05 35

Fauji Fertilizer Bin Qasim (FFBL) is expected to post PAT of PKR 5.70bn (EPS: PKR 6.10), higher by 32% YoY from CY12. Earnings for 4Q CY13 are likely to clock in at PKR 2.41bn (EPS: PKR 2.58) and we expect the company to announce final payout of PKR 2.75 per share taking total CY14 dividends to PKR 5.50 per share. While we expect urea offtake to decline by 20% YoY for CY13, rejuvenated level of DAP offtake is expected to garner pace for boosting topline. Despite DAP being the mainstay of FFBL, lopsided trend of primary margins, is estimated to inhibit the prospective growth in topline for CY13. Higher transport costs on the back of increase in fuel prices is likely to elevate distribution costs to PKR 185 per bag as compared to normal levels of PKR 148 per bag in CY12. Also, abysmal decline in other income by 48% YoY exudes further constraints on bottomline. At current levels, FFBL is trading at a CY14 PE of 6.8x offering a dividend yield of 13% and we reiterate our BUY stance on the scrip.

KSE100 23.01.14 22.01.14 Change Bid 105.33

Date

27,064.34 27,015.12 49.22 Offer 105.43

Time

Forex (PKR/USD)

Money Market Repo (%)

Board Meetings
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27.01.14 28.01.14 29.01.14 Scrip LPCL FCCL FABL DGKC ANL

11:30 10:30 11:00 Volume 19.93 15.50 -9.10 3.87 1.60

Fauji Fertilizer Bin Qasim Ltd Lotte Chemical Pakistan Fauji Fertilizer Company Ltd Change 12.80 11.31 -1.27 -2.65 4.39 Rate (PKR) 11.09 16.39 13.99 95.40 9.17 Change 0.69 0.22 0.59 2.08 0.08 Change 0.59 (4.35)

KSE : Top Five Volume (mn Shares)

Commodity Prices
WTI (USD/bbl) Gold (USD/oz) Price 97.37 1,259.79

Fauji Fertilizer Bin Qasim (FFBL) is scheduled to announce its annual results for CY13 on Jan 2713. We expect the company to post PAT of PKR 5.70bn (EPS: PKR 6.10), higher by 32% YoY from CY12. According to our estimates, earnings for 4Q CY13 are likely to clock in at PKR 2.41bn (EPS: PKR 2.58) and we expect the company to announce final payout of PKR 2.75 per share taking total CY14 dividends to PKR 5.50. The hike in earnings is primarily due to better gas availability and easier pass-through of GIDC in CY13 as compared to the previous year. FFBL - Financial Highlights
Sales Cost of Sales Gross Profit Dist and Admin Exp Finance Cost Other Exp Other Income PBT Tax PAT EPS (PKR) CY13E 55,046 40,121 14,925 4,669 1,751 619 539 8,425 2,724 5,701 6.10 CY12A 47,911 36,450 11,461 3,650 1,821 565 1,038 6,463 2,131 4,331 4.64 YoY 15% 10% 30% 28% -4% 9% -48% 30% 28% 32% 4Q CY13E 21,265 15,476 5,789 1,583 502 251 140 3,592 1,185 2,407 2.58 4Q CY12A 18,703 13,672 5,031 1,235 457 343 157 3,346 1,139 2,207 2.36

(PKR mn)
YoY 14% 13% 15% 28% 10% -27% -11% 7% 4% 9%

Foreign Investors Portfolio Investment (FIPI)

Gross Buy (USD mn) 14.457 Gross Sell (USD mn) (7.131) Net flow (USD mn) 7.326

23.01.14

Source: KSE, NCCPL, SBP, Bloomberg & IGI Research

Source: Company Notice, IGI Research

Wajid Rizvi wajid.rizvi@igi.com.pk (+92-21) 111-234-234 Ext. 804 Research Department Karachi, Pakistan www.igisecurities.com.pk (+92-21) 0800-2-34-34

DAP - the arterial earnings root While we expect urea offtake to decline by 20% YoY for CY13, rejuvenated level of DAP offtake is expected to garner pace for boosting topline. Urea prices have averaged at PKR 1,717 per bag for CY13 while urea production remained sluggish mainly on account of lower gas availability and winter gas load management experienced especially during Dec13 for 4Q CY13. On the other hand, despite DAP being the mainstay of FFBL,

Friday, January 24, 2014

lopsided trend of primary margins, averaging at USD 260 per MT, is estimated to inhibit the prospective growth in topline likely to have emanated from 28% YoY higher DAP sales of 785k tons for CY13. Consequently, topline is expected to clock in 15% higher to PKR 55.05bn in CY13 as compared to last year. Lower support from other income Hike in transport costs on the back of increase in fuel prices and higher DAP sales is likely to elevate distribution costs to PKR 185 per bag as compared to normal levels of PKR 148 per bag in CY12; propping up overall opex by 25% YoY to PKR 5.29bn for CY13. On the other hand, abysmal decline in other income by 48% YoY to PKR 539mn exudes further constraints on bottomline. Outlook With the feasibility study for the meat business coming through successfully and the wind energy projects taking approval, FFBL is likely to determinate some support to the bottomline. Moreover, the declining trend of phos-acid prices is likely to heave primary margins for the ongoing 1Q CY14. At current levels, FFBL is trading at a CY14 PE of 6.8x offering a dividend yield of 13% and we reiterate our BUY stance on the scrip.

News in Focus
Forex reserves slump to USD 8.17bn According to State Bank of Pakistan countrys total liquid reserves contracted by USD 149mn, from USD 8.32bn on 10 Jan14, to settle at USD 8.17bn as on 17 Jan14. During last week, SBP's liquid forex reserves declined by USD 145mn to USD 3.322bn from USD 3.47bn. The decrease in the central banks reserves can be partially attributed to USD 59mn paid on account of external debt servicing and other official payments. Reserves held by banks observed a decline of USD 4mn to USD 4.85bn at end of last week.

Market Comment
Trading at the bourse was little changed yesterday continuing its consolidation mode for a third day amid a healthy market participation, with KSE100 index closing up a modest 49 points DoD at 27,064 points levels. On the sectoral front heavy-weight Oil and Bank depicted a mixed trend however Fertilizer barring ENGRO, continued with the positive momentum alongside Cement. In the overseas investment portfolio foreigners remained net buyers for a sixth consecutive session with inflow of USD7.3mn.

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