The Abu Qir Fertilizers Company has reported neutral results for the fourth quarter (Q4) of fiscal year (FY) 2020.

The company’s top-line came in at EGP 2.073bn, up 14% quarter-on-quarter (q-o-q), but down 1% year-on-year (y-o-y). It reported a bottom-line amounting to EGP 467m, down 21% q-o-q, but flattish y-o-y, whilst registering a gross margin of 32.7%, down 5.5pps q-o-q, and up 0.02pps y-o-y.

Abu Qir Fertilizers’ revenue surge q-o-q was due to higher sales volumes both locally and globally. Meanwhile, the q-o-q margin drop was a result of lower product prices, with urea witnessing a fall of 7% q-o-q and 13% y-o-y. Ammonium nitrate averaged $229/tonne compared to the $182/tonne reported in Q3 of FY2020 and Q4 of FY2019.

Going forward for Q1 of FY 2021, Naeem Research holds a neutral outlook on AFC’s earnings, as sales volumes are expected to remain strong. This comes despite fertiliser prices likely to remain weak, including with urea trading at $230/tonne.

With regards to dividends, Naeem Research expects the company to propose EGP 1.25/share versus EGP 1.30/share in FY2019, yielding 8.3% over the current share price.

Naeem Research continues to recommend Abu Qir Fertilizers as a BUY with a TP of EGP 26.37/share, trading at a forward P/E of 7.6x, a zero-debt balance sheet and a dividend yield of 8.3%. The company continues to remain fundamentally undervalued.