Equity Analysis /
Pakistan

Fauji Fertilizer Bin Qasim Ltd: Pakistan fertiliser: Urea offtake decline on pre-buying

    Intermarket Securities
    24 May 2019

    According to data released by NFDC, Urea offtake for Apr’19 clocked in at 2,92K tons, down 22%/28% yoy/mom. The decline in offtake is mainly attributed to pre-buying by dealers in Mar’19 in anticipation of increase in urea prices by other players. Recall that FFC increased the urea price by PKR80/bag, which was followed by other players with a lag. Hence, FFC observed sharp decline in urea sales by 51%yoy.

    On a cumulative basis, Urea offtake increased by 2%yoy to 1.65mn tons for 4MFY19. The Urea offtake for EFERT, FFC and FFBL declined by 5%, 14%, 62% yoy respectively. The incumbents observed market share attrition as imports and LNG based players capitalized their share.

    The production levels of urea for Apr'19 reached 495k tons, up 14%yoy, with resumption of LNG based plants added 77k tons to the industry.

    The Urea inventory levels closed at 337K tons, down 23%yoy. As demand for Kharif season picks up in the coming months; the planned import of 100k tons, coupled with smooth operations of LNG based players, will be sufficient to maintain adequate inventory levels, in our view.

    DAP offtake stood at 86k tons in Apr'19, up 25%yoy/32%mom. On a cumulative basis, DAP offtake declined to 37%yoy to 275k tons in 4MCY19 mainly due to the increase in prices amid PKR depreciation. Its inventory stood at 619K tons, up 3.0x yoy where major chunk is held by FFC and FFBL. This could be attributed to the relatively higher prices compared to Urea which is depressing demand.