The articles written on this blog are based on my personal analysis. The securities target prices are for information only and is not an offer to buy or sell. The reliance on these recommendations are not guaranteed as they are based on my personal assessment as a Financial Analyst. My analysis is based on Business TV Channels, Business/ Financial websites, and from Finance books. All views that I presented are to the best of my knowledge and I invest in Stock Market with this analysis in mind. While the information contained herein is from sources believed reliable, I do not represent that it is accurate or complete and should not be relied upon as such. Opinions expressed may be revised at any time.

Sunday, January 23, 2011


Fauji Fertilizer (FFC) is one of the giants of KSE 100. The good thing about it that it belongs to a non-cyclical industry. However, even better thing is that it pays out all what it earns it the form of dividend. Yes, it usually has a 90% payout ratio. It is also the biggest company in this sector after ENGRO. However, it is not directly comparable to ENGRO because ENGRO is a conglomerate which predominant business is fertilizer.

Like it peers, FFC is also facing a gas curtailment issue. However, manufacturers are responding this issue by raising urea prices so no one is expecting any great impact on its earnings.

The company is expected to post its results for annual year 2010 (the companies in this sector present their financial statements on calendar year basis) somewhere between Feb-March. The expected EPS is PKR 16 with the cumulative dividend is expected to reach PKR 15. With the current price of around PKR 150, the company is trading at a P/E of 9.4 and a dividend yield of 10%. As you can see in the graph, the company has performed well in the last few days, it is due to this sudden upsurge the dividend yield and P/E is not looking as attractive (market is trading at a P/E of 8 – 8.5). However, investors should watch this share carefully and once they got an opportunity to buy it somewhere in the range of 130-140, they should buy it. The analysts are giving a target price of around PKR 160, which means an upside of 6.6% is achievable from current levels. 10% dividend yield and 6.6% upside means total expected return of 16.6%. Not that bad even at current levels. However, many analysts are expecting a correction in the market so if the price of the share goes down in future investor can get an expected return of more than 16.6%.

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