As per the latest numbers released by NFDC, urea offtake declined by 41% YoY to 0.69Mn tons in Jun’21 due to high-base effect (1.2Mn tons in SPLY).

To recall, sales crossed the 1.0Mn mark in Jun’20 amid clarification on the subsidy front and pre-buying by dealers in anticipation of hike in gas prices. DAP offtake also dropped by 61% YoY to 68K tons in Jun’21 owing to lower inventory levels driven by supply disruptions in the global market.

On the other hand, we reiterate that the pricing power of fertilizer players is still strong (lower urea inventory levels of 0.43Mn tons in Jun’21), which is evident from the recent increase in urea prices by PKR 50/bag (effective from Aug’21). DAP prices are also on an uptrend with a recent price hike of PKR 200/bag in Jul’21. That said, our top picks in the sector are FFC and FFBL with Jun’22 TP of PKR 135 and PKR 35 (potential upside of 25% and 29%), respectively.

Courtesy – BMA Capital Management Ltd.