FFBL FAIR VALUE Rs. 42

FFBL Current Price: Rs. 27.00

FFBL FAIR VALUE Rs. 42

FFBL is currently trading at CY08E P/Ex of 7.7x (sector CY08E P/E: 10.5x). The scrip offers 49% TSR (including 13% dividend yield) from our Dec 08 PT of Rs. 42/share. FFBL is now set to produce 637k & 675k tons of urea & DAP p.a. from CY09. FFBL is likely to benefit from ever increasing international DAP prices coupled with assured demand of the product. The company also has the advantage of timely supply of Phosacid (basic DAP raw material) courtesy its JV with PMP Morac. FFBL sales revenue is expected to grow at a 3 year CAGR of 100%, whereas PAT is expected to increase by 3-year CAGR of 21%. We expect the company to continue its high divided payout in the future. Major risks to our valuation include a more/less than anticipated increase in DAP prices, global shortage of Phosacid, change in subsidy on DAP and Urea, increase in discount rate. We recommend Buy at current levels.