Fatima Fertilizer Company Limited (FATIMA) announced its 1QCY21 result today, re-porting earnings of PKR 3.8Bn (EPS: PKR 1.8), up 53/1% YoY/QoQ. Improvement in earnings is primarily attributable to 1) increase in CAN/NP offtake by 1.5/1.7x YoY, 2) higher NP prices (↑ 1.1x YoY), and 3) lower finance cost (↓ ~57% YoY). Key highlights of the result are discussed below:

Due to higher fertilizer offtake and better pricing dynamics, net revenue increased by a massive 50% YoY to PKR 21.6Bn during 1QCY21.

Consequently, gross profit jumped by 41% YoY to PKR 9.3Bn in 1QCY21. Gross mar-gin clocked-in at 43% during the same period.

The company also reported a decline of 57% YoY in finance cost to PKR 0.5Bn dur-ing 1QCY21 owing to lower interest rates, which supported the bottom-line growth. Similarly, other income dipped by 52% YoY to PKR 98Mn.

The company reported effective tax rate of 36% during the period, slightly higher compared to 30% in SPLY. Normalizing the tax rate, EPS would have been PKR 2.0/sh, which is almost in line with our expectations.

We maintain our BUY call on the scrip with our Dec’21 TP of PKR 40/sh, implying an upside of 53% from the last close.

Courtesy – BMA Capital Management Ltd.