FAUJI FERTILIZERS COMPANY

LIMITED

Presented by
Marium Dahar
Marium Zehra
Nadia Awan
Sonia Agarwal

INVESTMENT GROUNDS
Stock Summary
Dip in demand of fertilizers
Key

Risks

Price hike in Raw Materials

Natural Calamity

12M Target Price: 135.89

Upside 20.02%

Current Price

PKR 113.22

12M High/Low

129/98.533

TICKER

FFC:PA

No of shares (Mn)

1272.2

Free Float (Mn)

1060

Market Cap (PKR Mn)

144,038

1M Average Daily Volume

936223

BUY

COMPANY OVERVIEW
34 years of establishment

PRODUCT PORTFOLIO

leading chemical fertilizer (UREA)

49% market share

Enjoying continuous growth

4 brands

Key Business
Unit

SONA UREA

DAP

FFC SOP

SONA BORON

Fertilizers

HISTORY
1978

Commencement of FFC as a joint venture between Fauji Foundation and Haldor

Topsoe A/S of Denmark

1982

Commissioning of Plant

1991

Listed with Karachi and Lahore Stock Exchanges

1992

Listed with Islamabad Stock Exchange

1993

Initial investment in Fauji Fertilizer Bin Qasim Limited

1997

Achievement of QMS certification

2002

FFC acquired PSFL

2003

FFC obtained OHSAS-18001:1999.2

2008

DBN of Plant III was executed and commissioned

2010

Investment in FFC Energy Limited

2011

SAP - ERP implemented in the Company

SWOT ANALYSIS

Strengths:

Weaknesses:

Strong Distribution

Limited capacity

Strong Advertising

Illiterate farmers

Well planned
Warehousing

Lack of technology

Opportunities:
Govt Support

Threats:

Exports can be
improved

Political conditions

Capacity can
increased

Bio gas

Prices of gas
Gas load shedding

2011 PERFORMANCE

GLOBAL SCENARIO
WORLD GDP GROWTH (%)

Source: IMF

GLOBAL SCENARIO

GLOBAL SCENARIO

Source: Food and agriculture Organization of UN

DEMAND/SUPPLY OF UREA

GLOBAL MARKET

INDUSTRY FUNDAMENTALS
Pakistan Population (Mn)
200

196.07
188.23 192.11

190
180
170

167.44

170.5

173.6

180.71

177.1

1500

184.43

1000
Urea Price V/S CPI
500

160

1400

1220

1200

150

0
2008A 2009A 2010A 2011A 2012F 2013F 2014F 2015F 2016F

1000
800

600

Per Capita ($)

1045

20.00%

806

752

15.00%

586

10.00%

400

5.00%

200

62
60
58
56
54
52
50
48
46

Total Labor Force (Mn)

56.33

57.24

61
58.5

0.00%

2008A

59.14

2009A

2010A

Urea Price

2011A

2012F

CPI (%)

53.72
51.78

2008A

2009A

2010A

2011A

2012F

2013F

25.00%

2014F
Source: Pakistan Economic Survey

INDUSTRY FUNDAMENTALS

Source: Economic Survey of Pakistan

Urea decline by 5% in
2010----floods
Import increases due
to gas shortage.
2012, Demand =
8.9mt, Supply 6.7 mt
Source: Engro Analytics

MARKET POSITION
Growth in Market Share

60%
50%
40%

40%

43%

47.60%

Urea Market Share-FY12

49%

46%

45%

20%

30%

25%

10%

Engro Fertilizers
Fauji Fertlizers

20%

Reliance Group

46%

10%

Rest

0%
2007

2008

2009

2010

2011

2012

Source: Company Accounts

Source: Company Accounts

140

133.24

Sales (PKR Bn)

114.79

120
95.19

100
78.15

80
60
40

28.42

30.59

36.16

2007A

2008A

2009A

44.88

55.22

60.88

20
0
Source: Company Accounts

2010A

2011A

2012F

2013F

2014F

2015F

2016F

FINANCIAL ANALYSIS
EBITDA
60

50.83

54.78

55.2

45.97

50
37.8

40

Gas curtailment issue 12%

GIDC 17%
GST 16%

80%

37.56

60%

30
20

100%

40%
12.52

16.35

19.98
20%

10

0%

-20%
2008A 2009A 2010A 2011A 2012F 2013F 2014F 2015F 2016F

EBITDA (PKR Bn)

Source: Company Accounts

YOY Growth

Net Profit
35
29.41

30

31.9 32.16

26.34
22.5

25

21

20
15
10

6.5

8.8

11.02

5
0
2008A 2009A 2010A 2011A 2012F 2013F 2014F 2015F 2016F

Net Profit (PKR Bn)

Source: Company Accounts

Profit Margin %

45%
40%
35%
30%
25%
20%
15%
10%
5%
0%

FINANCIAL ANALYSIS
Liquidity
1.4
1.2
1
0.8
0.6
0.4
0.2
0

Volatility in Market Price

160
2008A 2009A 2010A 2011A 2012F 2013F 2014F 2015F 2016F

Current Ratio

26.52

25

20.71

20
15

126.82

100

25.07

85.39
69.83

80
60
25.28

16.5

16.26
13.22

23.12

140
120

Quick Ratio
Earnings Potential

30

144

40

28.98

20
0

13

2008A

10

2009A

2010A

Market Capitalization (PKR Bn)

2011A

2012F

Market Price (PKR)

5
0
2008A 2009A 2010A 2011A 2012F 2013F 2014F 2015F 2016F
EPS

160
140
120
100
80
60
40
20
0

DPS
Source: Company Accounts

FINANCIAL ANALYSIS
Debt to Equity

2.5
1.95

1.79

1.6

1.6
1.41

1.5

1.31

1.22

1.24

1.37

140%

70%

120%

60%

100%
80%

0.5
0

62%

Debt to Assets
64%
58%

57%

55%

55%

58%

40%

40%

30%

20%

20%

0%

10%
0%

ROE %

2008A 2009A 2010A 2011A 2012F 2013F 2014F 2015F 2016F

Source: Company Accounts

Source: Company Accounts

2008A

2009A

2010A

2011A

2012F

2013F

2014F

2015F

2016F

Net profit margin (%)

21.33%

24.4%

24.58%

40.73%

34.48%

33.71%

30.90%

27.79%

24.14%

Asset turnover (x)

1.03

1.1

1.12

1.03

1.16

1.25

1.31

1.32

Financial leverage (x)

2.44

2.78

2.86

2.56

2.35

2.26

2.23

2.31

2.49

ROE (%)

52.2%

69.6%

77.3%

116.8%

83.4%

88.9%

86%

83.9%

79.1%

Source: Company Accounts

62%

50%

60%

2008A 2009A 2010A 2011A 2012F 2013F 2014F 2015F 2016F

66%

VALUATION

Target Price shows an upward

trend by 20% based on closing
price of PKR 113.22

Equity Value (PKR Mn.)

PV FCFF
PV Terminal Value
Enterprise Value
PV Debt
Equity Value

95,571
90,366
185,937
13,054
172,883

Assumptions
Risk Free Rate (SBP DR)
Risk Premium
Beta
Cost of Equity
Cost of debt
Tax rate
WACC
Terminal Growth Rate

1272 Mn Shares

PKR 135.89

11.41%
6.50%
0.7955
16.58%
11.84%
35%
11.54%
5%

VALUATION

Equity Value (PKR Mn.)

PV FCFE
PV Terminal Value
Enterprise Value
Equity Value

90,562
122,346
122,346
212,909

Current Closing
Price PKR
113.22

1272 Mn Shares

Target Potential
gives an increment
of 47.8%

PKR 167.35

THANK YOU