Morning Briefing for April 28, 2014 – Standard Capital

Karachi, April 28, 2014 (PPI-OT): EFERT – As good as it gets ~ HOLD

Engro Fertilzers (EFERT) is improving as its plant has increased its production capacity (Enven Plant) and if gas is constantly supplied by SNGPL or for that matter any other alternate source such as direct from biggest E and P then company would increase manifold.

EFERT is seeking to obtain cessionary price of $0.70 for feed gas for a period of 10 years ~ which is farfetched at the moment; since management claims in the recently concluded analyst briefing that current price of urea also somewhat incorporates concessionary gas price.

However, EFERT plant utilization will increase as compared to current utilization level, which Standard Capital Securities (Pvt.) Limited feels a good omen. EFERT has already reported above 450k tons sales in 1QCY14 (total per annum capacity is 2.1mn tons).

EFERT in limelight alternate arrangements on gas supplies

As for many years owing to short supply of gas from SNGPL, EFERT was in distress as its new Enven plant couldn’t perform to the optimum level but EFERT has entered into GSA (Gas Supply Agreement) directly with the operators of KPD, Makori and Reti Maru fields to supply 79 mmcfd gas which will help EFERT to become prosper in an upcoming quarters. Enven did received good gas from Reti Maru which is a good omen. Some of the other alternate fields which management is looking at is Sara West wherein they are having arrangements with OGDC.

Future application holds good

EFERT 1QCY14 results have been a bit below par given seasonality involved in sales of Urea; however, the phenomenon may change in coming quarters especially in Kharif season. Standard Capital Securities (Pvt.) Limited sees application of urea in rice and impending cotton crop all across Pakistan. Standard Capital Securities (Pvt.) Limited has yet to see as how much inventory of urea is in place at the end of Rabi season but still Standard Capital Securities (Pvt.) Limited feels that this inventory would be released in coming months up to June at a good price of around Rs1800 (general prices Rs1711).

Industry sales increasing

Demand of fertilizers have been increasing and so the industry is in boom phase as in 2012 the total sales reported were Rs182 Trillion and in 2013 the sales jumped up by 16.48% and reached to Rs212 Trillion. EFERT is playing a vital role in urea industry and so its market share is increasing in the industry.

The post Morning Briefing for April 28, 2014 – Standard Capital appeared first on Business News Pakistan.

The post Morning Briefing for April 28, 2014 – Standard Capital appeared first on AsiaNet-Pakistan.

Leave a Reply