Fertilizer offtake predicted to decline in April 2024: industry analysis

In April 2024, the off-take of urea and DAP (Diammonium Phosphate) in the fertilizer sector is expected to decrease compared to previous months, impacting industry dynamics.

Urea Sales Projections

The anticipated urea sales for April 2024 are estimated to be around 327,000 tons, showing a decline of 20% year-over-year (YoY) and 51% month-over-month (MoM). This decline is primarily driven by reduced sales volumes from Engro Fertilizers Ltd (EFERT), which is expected to experience a significant YoY/MoM decline due to operational factors. Fauji Fertilizer Company (FFC), however, is expected to maintain stable sales volumes of 187,000 tons, supported by pre-buying activities in previous months.

Provisional Urea Offtake Comparison (in ‘000 tons)

Company	Jan-24	Feb-24	Mar-24	Apr-24E	YoY	MoM	4MCY24E	YoY
FFC	234	228	293	187	+40%	-36%	942	+23%
EFERT	210	197	215	76	-52%	-65%	698	-1%
FFBL	32	12	21	35	-6%	+69%	99	-21%
FATIMA	98	74	102	26	-51%	-75%	300	+59%
Others	39	33	40	3	-89%	-93%	115	-53%
Total	613	543	671	327	-20%	-51%	2,154	+6%

DAP Offtake Outlook

The DAP off-take for April 2024 is expected to be approximately 95,000 tons, showing an 88% increase YoY but an 11% decrease MoM. Notably, Fauji Fertilizer Bin Qasim Limited (FFBL), the sole manufacturer of DAP, is anticipated to contribute 52,000 tons to the monthly off-take, bringing the cumulative figure for the first four months of CY24 to 221,000 tons.

Provisional DAP Offtake Comparison (in ‘000 tons)

Company	Jan-24	Feb-24	Mar-24	Apr-24E	YoY	MoM	4MCY24E	YoY
FFC	0	17	0	29	NM	NM	47	+92%
EFERT	37	25	21	10	-8%	-53%	93	+66%
FFBL	28	63	78	52	88%	-34%	221	+43%
FATIMA	0	3	2	3	NM	+44%	8	-59%
Others	2	7	5	1	NM	-78%	14	-64%
Total	67	115	107	95	88%	-11%	384	+30%

International Price Trends

The premium of international urea prices over local prices has contracted to 13%, indicating potential shifts in pricing dynamics. As global prices continue to decline, local market trends may be influenced by regular increases in gas prices, which could pose challenges for fertilizer companies in adjusting urea prices accordingly.

Market Analysis

Despite challenges, the fertilizer sector is expected to offer steady revenue and cash flow opportunities in the future. Notably, FFC and EFERT have demonstrated strong year-to-date performance, with FFC showing potential for capital growth.

JS Fertilizer Universe Overview (Values in Rs mn)

Company	P/E (x)	D/Y CY24F	D/Y CY25F	Market Cap
FFC	4.07	16%	17%	192,172
EFERT*	5.95	17%	19%	201,764
FFBL	3.05	6%	8%	42,508

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Disclosure:

The information in this article is based on research by NFDC and JS Research. All efforts have been made to ensure the data represented in this article is as per the research report. This report should not be considered investment advice. Readers are encouraged to consult a qualified financial advisor before making any investment decisions.