The Misr Fertilizers Production Company (MOPCO) has issued its financial results for the second quarter (Q2) of 2020, reporting a bottom-line of EGP 651m, an increase of 22% quarter-on-quarter (q-o-q) and 30% year-on-year (y-o-y).
The company reported a gross margin of 41.7%, reflecting a decline of 6.4pps q-o-q and 7.47pps y-o-y, impacted by lower urea prices and a drop in export proportions. The prices of urea declined 3% q-o-q and 16% y-o-y in local currency terms.
Sales volumes were likely to have increased, by up to 10% q-o-q, due to seasonality factors, with MOPCO’s proportion of exports assumed to have dropped below the normal 65% level during Q2 of 2020. Global urea prices averaged $231/tonne in export markets during the quarter, compared to $273/tonne in Q2 of 2019.
Lower interest expenses, which declined in Q2 of 2020 to EGP 91m, reflect a downturn of 37% q-o-q and 71% y-o-y, This was favourably impacted by the 3pps drop-in interest rates and accelerated debt repayments.
MOPCO also, during Q2 of 2020, booked a deferred tax gain of EGP 11m, compared to tax expenses of EGP 124m in Q1 of 2020 and EGP 101m in Q2 of 2019.
Naeem Research noted that, going forward, it has a positive outlook for MOPCO, betting on higher urea prices, as quarter-to-date (QTD) prices increased by 11% to touch $280/tonne. It also saw an improvement in the export proportion, back to 65% or above.
“We continue to recommend MOPCO as a BUY with a TP of EGP 86.2/share, a fundamentally undervalued stock, which trades at an attractive P/E (2020e) multiple of 6.9x,” Naeem Research noted.