Sep 1, 2015 - development will clock in at PKR138/bag on urea price (PKR118 excl. gst.). ... in raising urea prices with
BMA Research Flashnote
Tuesday, September 1, 2015
OGRA finally increases gas prices As per a notification issued by the Oil and Gas Regulatory Authority (OGRA), gas prices have been increased in the range of 5%-63%. Amongst the sectors, impact remains concentrated on the Fertilizer sector with sector gas prices increasing by 23% (fuel) to 63% (feed). The Cement and Textiles sectors remained largely immune with rates for captive power increasing by a mere 4.7%, thereby having minimal implications for earnings.
Fertilizer sector: Fertilizer sector has been imposed with the highest increase in tariffs with 63% and 23% surge in tariffs for feed and fuel, respectively. As per our calculations, the impact of the said development will clock in at PKR138/bag on urea price (PKR118 excl. gst.). On the positive front, we believe the industry is in a position to pass on the cost increase with a PKR377/bag space available in comparison with imported urea prices (USD295 C&F). We believe this time FFC will likely take the lead in raising urea prices with EFERT following (EFERT eventually benefitting from the gas price increase if prices increased).
Below, we have provided a sensitivity to Fertilizer companies’ earnings for various pass through of gas impact in urea price. EFERT will likely be the biggest beneficiary should a pass-through of 50% or more occur.
BMA Research Flashnote
Cement sector: The cement sector will largely remain unaffected from the increase in tariffs since rates on captive increased by a mere 5% from PKR573/mmbtu to PKR600/mmbtu. Textile sector: Similar to the Cement sector, the impact on the Textile sector remains negligible owing to the meager increase in gas prices for captive power plants. Report By: Sajjad Hussain BMA Capital Management Ltd. (9221) 111 262 111 This report produced by BMA Capital Management Ltd. contains information from sources believed reliable; we do not guarantee that the matter is accurate or complete. Our Research Analysts compile this memorandum based on opinions and judgments, which may vary and be revised at any time without notice. This report is for information only and is not an offer to buy or sell, or solicitation of any offer to buy or sell the securities mentioned. It is published for the use of our clients may not be reproduced, distributed or published by any person for any purpose whatsoever. Action will be taken for unauthorized reproduction, distribution or publication. The views expressed in this document are those of the BMA Research Department and do not necessarily reflect those of BMA or its directors.
