Earnings Report /
Egypt

Abu Qir Fertilizers: 1Q21/22 – ABUK kicks off FY21-22 with a bang

  • Topline surges yearly on strong urea prices

  • Margins surge across the board

  • Outlook remains positive on favorable urea prices; Revert to Equalweight on recent gas hikes

Omar Attia
Al Ahly Pharos Securities Brokerage
14 November 2021

Topline surges yearly on strong urea prices

ABUK reported 1Q21/22 sales of EGP 2,655 million (+52% YoY, + 5%QoQ). Despite the sequential decline in volumes sold (-6%QoQ), sales were primarily boosted by the undergoing surge in urea prices, as European producers saw prices averaging USD440/ton (+28%QoQ, +186%YoY), while prices in Egypt hit an average of USD477/ton (+23%QoQ, +80%YoY).

Margins surge across the board

Gross profit hit EGP1,550 million (+136%YoY, +24%QoQ), implying a GPM of 58.4%, versus 4Q20/21’s figure of EGP1,246 million with a GPM of 49.2% and 1Q20/21’s EGP657 million with a GPM of 37.6%.

ABUK’s solid gross profit filtered down to 1Q21/22 EBITDA as it recorded EGP 1,448 million (+159% YoY, +33% QoQ), implying a margin of 54.6%, versus 4Q20/21’s figure of EGP1,087 million with a margin of 42.9% and 1Q20/21’s EGP560 million with a margin of 32.0%.

ABUK’s 1Q21/22 bottom-line hit EGP 1,290 million (+ 88% YoY, +20% qOq), implying an NPM of 48.6% versus 4Q20/21’s figure of EGP1,071 million with a margin of 42.3% and 1Q20/21’s EGP687 million with a margin of 39.3%.

Outlook remains positive on favorable urea prices; Revert to Equalweight on recent gas hikes

1Q21/22’s positive set of results hammer home the crucial aspect of elevated urea prices for nitrogen producers, that being said, 2Q21/22’s prices hit USD900/ton (QTD average is USD782/ton) in Egypt and USD875/ton (QTD average is USD519/ton) in Europe, which we believe should entail a strong set of results for 2Q21/22 even after the recent gas hikes.

We updated our valuation on ABUK and revised our TP to EGP21.31/Share, from EGP25.58/share as we incorporate: i) un upward revision on urea prices, ii) incorporating the recent natural gas hike from USD4.50/MMBTu to USD5.75/MMBTu, and iii) an updated timeline on the kickstart of the Abu Qir 3 plant expansion.

ABUK is trading at 21/22e P/E of 5.9x and EV/EBITDA of 2.9x.