Despite prolonged winter gas curtailment, declining international DAP margins and recent impact of feed stock prices, FFBL is trading at 2012 dividend yield of 15 per cent. Moreover, the analysts at Topline Securities expect, despite higher gas curtailment in 4Q2011, 4Q2011, earnings to be around Rs3.1 per share which would lead to 2011 full year EPS to Rs10.8. Further, they said final cash dividend of Rs2.5-3 per share taking full year dividend to around Rs9-9.5 per share was also being expected.
“Though international DAP prices (US region) are trading around $580-600 per tonne (cfr), but, regional DAP prices (Arabian Gulf) are still higher at $650-670 per tonne,” said Farhan Mahmood. Moreover, the analyst said, with lower DAP inventory in local market due to gas curtailment, recent DAP contract prices are being settled at $680-690 per tonne (Fob). However, once DAP production resumes, we might see local DAP prices following the international trend and thus DAP prices are likely to fall to $630-640 per tonne later in 2012.
Thus we expect DAP margin which is currently around $265 per tonne may fall gradually to $230 per tonne in 2012 compared to average of $298 per tonne in 2011. With ongoing winter gas curtailment, both urea and DAP plants have been shut down for an annual turnaround (ATA) for 40 days. Urea plant was shutdown in the last week of December 2011, while DAP plant went off in the second week of January 2012. Last year the plant also witnessed similar ATA for 40 days. However, this time we believe, resumption of urea production may get delayed till the first week of March; even so, DAP production is likely to come early by the end of February 2012 as DAP requires lower quantity of gas, it was added. For full year 2012, we expect gas curtailment to FFBL will be around 38-40 per cent, higher than fertiliser plants on Mari network but lower than Sui fed fertiliser plants. The analyst said FFBL was expected to post full year 2011 EPS of Rs10.8 (4Q2011 EPS of Rs3.1) compared to profit of Rs7 per share in 2011 (4Q2010 EPS Rs3.9), up by massive 54 per cent. “We have assumed 8-18 per cent lower sales in December compared to sales in the month of November as gas curtailment remained on the higher side,” he said.
