LAHORE: The offtake of urea is likely to clock in at 5.8 million tonnes in 2020, mainly on the back of higher than expected urea offtake during the first 10 months of the year.
Shankar Talreja, Deputy Head of Research at Topline Securities Limited, said, “We revisited our urea offtake for 2020, wherein we now expect urea offtake to clock in at 5.8 million tonnes, as compared to our earlier estimates of 5.5 million tonnes.”
He added that previously, Topline had trimmed urea offtake on expectations of supply side disruptions amid Covid-19 outbreak and impact of locust attack.
“We are revising up our earnings forecasts for country’s fertilisers by 5-61pc (excluding Fauji Fertilizer Bin Qasim Limited) for 2020-2022 on the back of higher-than-expected urea offtake during 10M2020, impact of Gas Infrastructure Development Cess (GIDC) review petition and review of September detailed accounts,” Talreja maintained.
He recalled that the Supreme Court (SC) had dismissed review petitions on GIDC. However, as per the verdict, all fertiliser companies can now pay their outstanding amounts in 48 equal monthly instalments instead of 24 monthly instalments earlier.
The analyst highlighted that all companies have already accounted for GIDC in their accounts, except for Engro Fertilizer Limited on its Enven Plant, for which the company has taken stay order from the Sindh High Court.
“We have also not taken the impact of EFERT’s Enven plant in our model,” he said.
Fauji Fertiliser Company
The analyst forecasts a raise of 28pc in FFC earnings primarily due to an increase in urea offtake estimate by 8pc, from 2.3 million tonnes to 2.5 million.
“We also revised our 2021-2022 earnings given that the Supreme Court has allowed GIDC payment over 48 monthly instalments instead of 24.”
Engro Fertilisers Limited
Meanwhile, the research analyst revised up the earnings forecasts for EFERT by 8-61pc for 2020-2022 on the back revision in urea offtake estimate for 2020 from 1.7 million tonnes to 2 million tonnes, one-time tax reversal of Rs2,117 million (EPS impact Rs1.6) in 3Q2020 and incorporating the impact of GIDC review petition.
The earnings of ENGRO are also expected to grow 5-28pc for 2020-2022. “Revision is attributed to an upward revision in earnings estimate for EFERT due to the above-mentioned reasons and increase in earnings estimate for Engro Polymer & Chemicals (EPCL) amid higher-than-expected PVC-Ethylene margins and better-than-expected 9M2020 earnings.”
Fauji Fertiliser Bin Qasim
Lastly, Talreja revised upwards the earnings’ forecast of FFBL for 2020, from a loss per share of Rs1.63 to an earning per share of Rs1.7.
The turnaround is primarily on the back of higher than expected DAP offtake (+37pc YoY in 10M2020), higher than expected margins on DAP, above than expected dividend from FFBL power company and lower effective tax rate at 16pc, he added.
“The forecast was also revised due to injection of new equity via right shares of Rs5bn and incorporating the impact of GIDC review petition (savings of Rs0.23 per share).”