Increment in gas tariff by ~100%
As per news flow, the government has planned to increase the gas tariff by 15%-100% across the board. Similarly, the tariff hike for the feed stock of fertilizer industry will be to the tune of ~100% for older plants (feedstock at PKR 102/mmbtu currently). According to our estimates:
1) In case of 100% increase in the feedstock price, an impact of ~PKR 100/bag (EX-GST) will be reflected.
2) In case of increase in fuelstock price hike by 15%, we will witness an incremental impact of PKR 14/bag.
| Feed stock (PKR/mmbtu) | FFC | FFBL | ENGRO (base) | ENGRO (EnVen) | FATIMA |
| Current | 102.01 | 102.01 | 102.01 | 59.29 | 59.29 |
| Proposed | 204.02 | 204.02 | 204.02 | 59.29 | 59.29 |
| Impact | Neutral | Neutral | Neutral | Positive | Positive |
| Source: Dawn, Global research | |||||
We believe fertilizer manufacturers will easily pass on the prices while maintaining their margins due to a significant differential in international prices and domestic prices.
However, we highlight ENGRO and FATIMA as the major beneficiary in the event of any hike in gas prices, mainly due to fixed tariff at USD 0.7/mmbtu for a period of 10yrs.
Global Securities Pakistan
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