By: InterMarket Securities Limited
FFBL: We revise down our target price by 7% to PkR67.7/share, due to recent fall in Urea/DAP prices in international and local markets. We also revise down our CY16/CY17F EPS by 13%/3% mainly on account of reduction in Urea prices by over PkR200/bag (PkR1760/bag) and change in primary DAP margin assumption to US$233/ton vs. US$240/ton earlier.
FFBL announced 2QFY16 EPS of PkR3.54/share, up 47%YoY to comfortably beat street estimates, mainly on account of higher‐than‐expected DAP retention price and lower gas curtailment. Other income of reflected incremental PkR4.2bn on account of GoP announced subsidy. The company also announced final cash dividend of PkR3.05/share (full year PkR3.80/share).
The stock is currently trading at FY16F P/E of 13.3x, which drops to 6.6x in CY16F, primarily due to its exposure in various sectors including, banking, meat, food and power. We foresee FFBL’s future price performance to be more of a function of its wide array of investments than a pure fertilizer play.