PAT up 72% YoY in CY10: FFBL yesterday announced its CY10 financial result, where the company registered 72% YoY growth in PAT to PKR6.5bn (EPS: PKR6.97). During 4Q, PAT was recorded at PKR3.6bn (EPS: PKR3.84), up 196% QoQ. DPS of PKR3.50 was announced as final dividend taking the yearly payout to PKR6.55/share.
Net sales up 18% YoY on higher fertilizer prices: Top-line of the company witnessed jump of 18% YoY to PKR43.3bn during CY10, primarily due to higher fertilizer prices (Urea/DAP price up 12%/32% YoY during CY10), as we estimate Urea/DAP offtake to fall by 19%/7% to 511k/656k tons during the year.
480bps hike in gross margins triggered earnings growth further: Gross margins increased to 31% in CY10 from 26% last year, up 480bps YoY on the back of healthy DAP primary margins during the year. Average DAP primary margins were recorded at USD287/ton, up 29% YoY.
Profit from associate and easing interest cost further supported profitability: Earnings growth got further support from 1) 69% YoY jump in other income emanating from share of profit from PMP and 2) 36% YoY decline in finance cost to PKR934mn in CY10.
Investment perspective: At yesterday’s closing price of PKR41.9/share, the scrip is trading at a 5% premium to our DCF based December-11 PT of PKR40/share. We maintain our estimates for now. Hold!
Top-line up 18% YoY; Gross margins up 480bps YoY
Despite an anticipated decline in Urea and DAP offtake to 511k tons (-19% YoY) and 656k tons (-7% YoY) respectively during CY10, gas curtailment combined with excess demand kept prices firm. Urea and DAP prices averaged PKR861/bag and PKR2,670/bag, up 12% YoY and 32% YoY respectively. Consequently, net sales of the company registered an increase of 18% YoY to PKR43.3bn. Simultaneously, Gross margins increased to 31% in CY10 from 26% last year, up 480bps YoY on the back of healthy DAP primary margins during the year (average DAP primary margins recorded at USD287/ton, up 29% YoY) triggering earnings growth.
Profit from associate and easing interest cost to support earnings growth
Despite PKR37mn share of losses from PMP during 4Q, PMP remained black on full year basis, with aggregate profit share standing at PKR121mn as against a loss of PKR315mn last year. Consequently, other income for the period recorded a phenomenal increase of 69% YoY to stand at PKR1.2bn. Furthermore, repayment of both long term and short term loans during the period led to a 36% YoY decline in finance cost to PKR934mn.
Investment Perspective – We maintain our estimates for now!
At yesterday’s closing price of PKR41.9/share, the scrip is trading at a 5% premium to our DCF based December-11 PT of PKR40/share. We maintain our estimates for now, which we shall review once detailed accounts are available.
Economic & Political News
Meeting 2010-2011 target: FBR required to collect over PKR871bn in the remaining 5MFY11
FBR has to collect over PKR871bn in the remaining 5MFY11 to meet the downward revised revenue collection target of PKR1,607bn. In case the revenue collection target is further revised downward to PKR1,580bn, the tax machinery would have to collect PKR844bn. FBR has provisionally collected PKR75.9bn up to January 24, 2010 and still has to collect PKR47.1bn to meet the monthly revenue collection target of PKR123bn for January 2010.
The research analyst(s) denoted AC on the cover of this report, primarily involved in the preparation of this report, certifies that (1) the views expressed in this report accurately reflect his/her personal views about all of the subject companies/securities and (2) no part of his/her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.
The report has been prepared by Elixir Securities Pakistan (Pvt.) Ltd and is for information purpose only. The information and opinions contained herein have been compiled or arrived at based upon information obtained from sources, believed to be reliable and in good faith. Such information has not been independently verified and no guaranty, representation or warranty, expressed or implied is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. Descriptions of any company or companies or their securities mentioned herein are not intended to be complete and this document is not, and should not be construed as, an offer, or solicitation of an offer, to buy or sell any securities or other financial instruments.
Research Dissemination Policy
Elixir Securities Pakistan (Pvt.) Ltd. endeavors to make all reasonable efforts to disseminate research to all eligible clients in a timely manner through either physical or electronic distribution such as mail, fax and/or email. Nevertheless, not all clients may receive the material at the same time.
Company Specific Disclosures
Elixir Securities Pakistan (Pvt.) Ltd. may, to the extent permissible by applicable law or regulation, use the above material, conclusions, research or analysis in which they are based before the material is disseminated to their customers. Elixir Securities Pakistan (Pvt.) Ltd., their respective directors, officers, representatives, employees and/or related persons may have a long or short position in any of the securities or other financial instruments mentioned or issuers described herein at any time and may make a purchase and/or sale, or offer to make a purchase and/or sale of any such securities or other financial instruments from time to time in the open market or otherwise. Elixir Securities Pakistan (Pvt.) Ltd. may make markets in securities or other financial instruments described in this publication, in securities of issuers described herein or in securities underlying or related to such securities. Elixir Securities Pakistan (Pvt.) Ltd. may have recently underwritten the securities of an issuer mentioned herein.
Other Important Disclosures
Foreign currency denominated securities is subject to exchange rate fluctuations which could have an adverse effect on their value or price, or the income derived from them. In addition, investors in securities such as ADRs, the values of which are influenced by foreign currencies effectively assume currency risk. Foreign currency denominated securities is subject to exchange rate fluctuations which could have an adverse effect on their value or price, or the income derived from them. In addition, investors in securities such as ADRs, the values of which are influenced by foreign currencies effectively assume currency risk.