Fauji Fertilizer Bin Qasim Limited (FFBL) conducted its webinar on Thursday to discuss 3QCY20 results and future roadmap. The company reported earnings of ~PKR 3.30Bn (EPS: PKR 3.54) in 3QCY20 as against a loss of ~PKR 0.47Bn (LPS: PKR 0.50) in 3QCY19.

The turnaround in profitability was mainly premised on: 1) increase in DAP (↑22% YoY) and Urea (↑15% YoY) offtake during 3QCY20, 2) improved DAP margins on account of increase in international DAP prices and better realized phosphoric acid prices, and 3) higher dividend income received from its subsidiaries.

While commenting on the issuance of right shares, the management stated that the proceedings from the right share are expected to raise PKR 5.0Bn. Moreover, the management intends to use the proceeds to lower its debt levels and manage its working capital requirements.

With the onset of Rabi season, we expect the fertilizer offtake to remain upbeat. Additionally, the uptick in international DAP prices (USD 368/ton, ↑19% YoY) on account of strong demand from India and Brazil will support profitability in 4QCY20. We have a HOLD call on FFBL with Jun’21 TP of PKR 25.6/sh, offering an upside of 10% from the last close.

(BMA Capital Management Ltd)