·         In light of recent developments, experts revise their investment case for EFERT where they upgrade the target price to PkR103/sh (Previously PkR82/sh), implying an upside of 15.9% from last close.

·         The stock offers DY of 16.9% which is among the highest dividend yielding stocks in PSX. We believe EFERT offers a perfect blend of value during these tough times where geo-political and local political tensions are looming.

·         We expect EFERT to post EPS of PkR15.12 in CY22 driven by recent PkR150/bag increase in urea prices and PkR16.3/16.9 in CY23/24 based on our assumptions of average Oil prices at US$110/90/85 in CY22/23/24 and average annual hike of PkR50/bag going forward. Additionally, we expect a cumulative payout of PkR15.0/sh for CY22 based on our assumption of ~100% payout ratio.

·         The price of EFERT’s urea is currently PkR70/bag higher than FFC’s as the management has taken into account the impact of costly gas in old plant derived under PP-12. With almost 70% of the gas in old plant under PP-12 and multiple independent party contracts, the weighted average cost of gas (WACOG) for EFERT is expected to increase by 13%YoY in CY22 which translates into PkR78/bag, hence the additional PkR70/bag hike has neutralized the impact.

Courtesy – AKD Research