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.
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.
| 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% |
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.
| 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% |
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.
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.
| 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 |
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.
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