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Tuesday, January 23rd, 2018

Morning Briefing for July 25, 2012 – Standard Capital

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by July 25, 2012 Brokerage

Karachi, July 25, 2012 (PPI-OT): FFC flies with great earnings – very good defensive play

FFC announced its much touted 1HCY12 results and outperformed market expectations. The company reported above expectation of Rs 10.3 billion (EPS: Rs 8.12) as against Rs 8.2 billion (EPS: Rs 6.44) reported in the preceding period last year. FFC passed on a second interim dividend of Rs 5/share which is in addition to already announced first interim of Rs 3/share (cumulative dividend of Rs 8/share).

P and L Rs million 1HCY12 1HCY11 Chg
Sales

36,130

24,220

49%

Cost of Sales

18,814

10,527

79%

Gross Profit

17,316

13,693

26%

Dist. Cost

2,632

2,166

22%

 

14,684

11,527

27%

Finance Cost

641

471

36%

Other Exp.

1,298

1,121

16%

 

12,745

9,935

28%

Other Income

2,459

2,882

-15%

NPBT

15,204

12,817

19%

Taxation

(4,871)

(4,628)

5%

NPAT

10,333

8,189

26%

EPS

8.12

6.44

26%

Source: KSE announcements

This shows whopping growth of 26% despite the fact that the peer company Engro Fertilizer is facing tremendous problems. FFC takes advantage of firmed up prices that hovers between Rs 1700 – Rs 1750 per 50kg bag. The prices are up because other suppliers are in distress given nonsupplies of feedstock gas to their respective plants wherein FFC takes advantage of dedicated gas supplies from Mari field. FFC can also easily pass on any price gas price increase onto end users.

FFC’s urea off-take increases QoQ despite government’s unwarranted import spree thus Standard Capital sees a huge49% uptick in sales i.e. Rs 36.1 billion. However, Standard Capital also sees cost escalations given purported increase in feedstock gas prices.

Material information – bad news for banks and Azgard9

FFC board has narrated that it would not pursue 9.99% equity stakes in Agritech Ltd (AGL) in the backdrop of poor polices pursued by the government related to gas distribution to fertilizer plants. This ostensibly is a bad news for ANL which was a beneficial owner of AGL. This is a bad news for couple of donor banks and ANL itself.

FFC valuations – very good defensive plays

FFC entails CY12PE of 7x – 7.3x and hence still offers good investment option. FFC also offers very good dividend yield of 13.3% and hence one of the best defensive plays.

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