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 .

72 51.23 192.5 173.00% 2008A 59.00% 806 752 15.24 61 58.11 190 180 170 167.78 2008A 2009A 2010A 2011A 2012F 2013F 25.33 57.00% 2014F Source: Pakistan Economic Survey .INDUSTRY FUNDAMENTALS Pakistan Population (Mn) 200 196.00% 400 5.43 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 20.1 1500 184.5 0 0.71 177.44 170.14 2009A 2010A Urea Price 2011A 2012F CPI (%) 53.00% 200 62 60 58 56 54 52 50 48 46 Total Labor Force (Mn) 56.07 188.6 180.00% 586 10.

9mt.INDUSTRY FUNDAMENTALS Source: Economic Survey of Pakistan • Urea decline by 5% in 2010----floods • Import increases due to gas shortage. • 2012. Supply 6. Demand = 8.7 mt Source: Engro Analytics .

59 36.42 30.22 60.15 80 60 40 28.88 55.19 100 78.79 120 95.24 Sales (PKR Bn) 114.88 20 0 Source: Company Accounts 2010A 2011A 2012F 2013F 2014F 2015F 2016F .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 140 133.16 2007A 2008A 2009A 44.

34 22.5 25 21 20 15 10 6.2 45.35 19.5 8.41 30 31.98 20% 10 0% 0 -20% 2008A 2009A 2010A 2011A 2012F 2013F 2014F 2015F 2016F EBITDA (PKR Bn) Source: Company Accounts YOY Growth Net Profit 35 29.97 50 37.56 60% 30 20 100% 40% 12.16 26.02 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% .8 11.8 40 • Gas curtailment issue –12% • GIDC – 17% • GST – 16% 80% 37.83 54.52 16.78 55.9 32.FINANCIAL ANALYSIS EBITDA 60 50.

71 20 15 126.2 1 0.82 100 25.07 85.FINANCIAL ANALYSIS Liquidity 1.39 69.26 13.98 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 .5 16.83 80 60 25.6 0.2 0 Volatility in Market Price 160 2008A 2009A 2010A 2011A 2012F 2013F 2014F 2015F 2016F Current Ratio 26.22 23.52 25 20.12 140 120 Quick Ratio Earnings Potential 30 144 40 28.4 1.28 16.8 0.4 0.

4% 88.1 1.24 1.4% 24.6 1.95 2 1.58% 40.03 1.32 Financial leverage (x) 2.41 1.44 2.31 1.25 1.9% 86% 83.86 2.6% 77.9% 79.71% 30.49 ROE (%) 52.22 1.03 1.31 1.73% 34.3% 116.35 2.48% 33.37 140% 70% 120% 60% 100% 80% 1 0.16 1.79 1.6 1.8% 83.FINANCIAL ANALYSIS Debt to Equity 2.12 1.5 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 (%) 21.5 1.14% Asset turnover (x) 1 1.5 1.2% 69.26 2.31 2.79% 24.1% Source: Company Accounts 62% 50% 60% 2008A 2009A 2010A 2011A 2012F 2013F 2014F 2015F 2016F 66% .78 2.33% 24.56 2.23 2.90% 27.

50% 0.84% 35% 11.54% 5% .89 11.883 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 135.22 Equity Value (PKR Mn.VALUATION Target Price shows an upward trend by 20% based on closing price of PKR 113.7955 16.366 185.937 13.571 90.) PV FCFF PV Terminal Value Enterprise Value PV Debt Equity Value 95.58% 11.054 172.41% 6.

35 .8% PKR 167.346 212.22 1272 Mn Shares Target Potential gives an increment of 47.562 122.909 Current Closing Price PKR 113.346 122.) PV FCFE PV Terminal Value Enterprise Value Equity Value 90.VALUATION Equity Value (PKR Mn.

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