Morning Briefing – Standard Capital’s Securities Limited

Karachi: Fauji continue to rule…

According to Standard Capital’s Securities, once again urea will be facing production shortages on account of gas curtailments by the Sui Northern Gas Pipelines Ltd. (SNGPL).

It appears that the swiftly progressing fertilizer plant, Engro Fertilizer, which was soon expected to be included among Pakistan’s best fertilizer companies, has suffered a shock from the SNGPL which has decided on discontinuing gas supply to Engro Fertilizer plant along with Dawood Hercules and Pak Arab thereby causing the plants to shut down indefinitely.

This shut down has occurred as a result of gas supply curtailment to SNGPL from various gas supply networks which are undergoing phases of annual maintenances.

This gas curtailment has been a huge source of concern for the Punjab province, whose Agriculture Department is worried about meeting the 3.35mn tons requirement of urea in the Rabi season and is banking on the remaining fertilizer plants and imports of urea by the government.

However, if on one hand Engro Pak Arab and Dawood Hercules are going to face revenue losses, other fertilizer companies such as Fauji Fertiliser (FFC), Fauji Fertilizer Bin Qasim (FFBL) are expected to overtake the market of the unfortunate fertilizer companies for the time being, resulting in a further increase in the sales of FFC and FFBL.

Moreover, the urea shortages will once again cause the prices of the nitrogenous fertilizer to climb hence benefiting the companies but pressurizing our poor farmers.

Standard Capital’s continues to have a BUY stance on FFC and HOLD on FFBL.

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