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FFC’s single product (urea) business with no major expansion/diversification plans and low +92 (21) 5611 532
net debt level lend relatively higher stability and visibility to its earnings/dividends. Local raza.khan@invisorsec.com
urea price remains at a 45% discount to its international counterpart. At the same time, www.invisorsec.com
the company offers exposure to the risks and rewards of the DAP business through its 51%-
owned subsidiary, Fauji Bin Qasim. We have assumed a dividend of PKR 3.40/share from
FFBL in Cy09, out of which PKR 2.25/share (declared in 4qCy08) will be received by FFC in
the 1qCy09. Chart–1: FFC relative price performance
130 KSE-100 FFC
Year to Dec Cy06 Cy07 Cy08 Cy09e Cy10e Cy11e
110
EPS-recurring 7.52 8.69 10.58 11.80 13.01 14.07
90
EPS-reported 7.52 8.69 10.58 11.80 13.01 14.07
70
DPS 8.00 8.80 11.00 11.80 13.00 14.10
50
EPS growth -5.3% 15.6% 21.7% 11.5% 10.2% 8.2%
30
PER 11.2 9.7 8.0 7.1 6.5 6.0
10
Div Yield 9.5% 10.5% 13.1% 14.0% 15.5% 16.8%
Mar-08
Apr-08
May-08
Jul-08
Aug-08
Sep-08
Dec-08
Jan-09
Oct-08
Jun-08
Nov-08
Feb-09
Mar-09
EV/EBITDA 6.2 5.6 4.6 4.2 3.9 3.8
P/BV 3.2 3.3 3.4 3.4 3.4 3.4
See last page for Analyst Certification and other important disclosures
Invisor Securities Pvt Ltd (Invisor) does and seeks to do business with companies covered in its research reports. As a result, investors
should be aware that Invisor may have a conflict of interest that could affect the objectivity of this report. Investors should consider
this report as only a single factor in making their investment decision.
March 25, 2009 Fertilizer
Chemical. Using 2-year expected earnings CAGR of 37% (from Cy09 till Cy11) and Cy09
PER of 16.4x, Engro is trading PEG of 0.45x. Besides reducing risk free-rate assumption by
100bp to 14%, we have also reduced before-tax cost of new debt by 300bp to 15% for
calculation of WACC, which has reduced from 17.3% to 15.9%. Resultantly, our Dec-09
target (adjusted for right issue) has increased from PKR 165 to PKR 200.
Aug-08
Apr-08
May-08
Jul-08
Sep-08
Oct-08
Nov-08
Dec-08
Jan-09
Mar-09
Mar-08
Jun-08
Feb-09
P/BV 2.55 1.68 1.24 1.49 1.36 1.23
Oct-08
Nov-08
Mar-09
Mar-08
Apr-08
Jul-08
May-08
Jun-08
Sep-08
Dec-08
Jan-09
Feb-09
P/BV 1.90 1.91 1.55 1.52 1.49 1.45
Analyst Certification
The research analyst(s), Raza Khan Niazi, for this report certifies that: (a) all of the views expressed
in this report accurately reflect his personal views about any and all of the subject securities or
issuers; and (2) no part of any of the research analyst’s compensation was, is, or will be directly or
indirectly related to the specific recommendations or views expressed by the research analyst(s) in
this report.
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