We expect Fauji Fertilizer Company Limited to announce earnings of PKR 10,960mn (EPS: PKR 8.62) in 1QCY24 compared to PKR 7,730mn (EPS: PKR 6.08) in 1QCY23, up by 42% YoY. The growth in profitability is attributable to i) a 3% YoY increase in urea offtake and ii) a jump in urea and DAP prices in 1QCY24. Gross margins are expected at 38.6% in 1QCY24 (down by 147bps) owed to higher gas prices. We do highlight that the OGRA has not yet notified the hike in feed and fuel gas prices FFC (which is on MARI’s network), while OGRA has notified fertilizer manufacturers, which are on the SNGP and SSGC networks, of the revision in said prices. Furthermore, the other income is anticipated to climb by 2x YoY in 1QCY24, arriving at PKR 7,430mn, given the increase in income from short-term investments and dividend income from subsidiaries and associate company (AKBL). Financial charges are projected to ascend by 40% YoY due to higher interest rates. On a QoQ basis, the profitability is expected to climb up by 47%, owed to i) a jump in urea prices by 16% QoQ, while DAP prices went down by 4% QoQ, and ii) an increase in urea and DAP sales by 10% and 8% QoQ, respectively.

We expect the company to announce an interim cash dividend of PKR 6.00/share in 1QCY24 (1QCY23: PKR 4.26/share).

Courtesy – AHL Research