Abu Qir Fertilizers is expected to issue results for the first quarter (Q1) of fiscal year (FY) 2020/21 soon, with the company reporting strong results for the quarter boosted by higher urea prices.
The company’s top-line is estimated to come in at EGP 2.069bn, reflecting unchanged results quarter-on-quarter (q-o-q), but a rise of 4% year-on-year (y-o-y). Gross margins are set to register 43.6%, reflecting a rise of 10.9% q-o-q and 6.1% y-o-y.
Net profit is forecasted at EGP 684m, up 47% q-o-q and 8% y-o-y. Global urea prices averaged $266/tonne, higher by 15% q-o-q and lower by 2% y-o-y. In spite of higher output prices, Abu Qir Fertilizers’ top-line is expected to be flattish q-o-q, due to lower sales volumes, as seasonality factors are likely to have pushed demand lower throughout Q1 of FY 2020/21.
Nevertheless, margins are expected to rise significantly both q-o-q and y-o-y, due to an increase in export proportions.
Naeem Research sees that Abu Qir Fertilizers’ stocks are trading at an attractive forward P/E multiple of 9.6x, and combined with a healthy dividend yield. Abu Qir Fertilizers continues to represent a fundamentally undervalued stock, with Naeem Research recommending the company as a BUY with a TP of EGP 26.37/share