DAP prices expected to rise Rs125 per bag

DAP prices are expected to increase Rs100 to Rs150 per bag, which will result in better margins for Fauji Fertilizer Bin Qasim Limited (FFBL), according to an analyst.

India had recently booked around three million tons of DAP at a price of $500 per ton, which is higher than the last recorded rate of $460 per ton in May. This gives room for a further hike in local DAP price, according to Elixir Securities.

FFBL is the country’s sole manufacturer of diammonium phosphate (DAP), a fertiliser which is used in the agriculture sector.

Local DAP prices have increased by 22 per cent this year following a seven per cent hike in international prices, said Elixir Securities analyst Umar Nauman in his research report on Monday.

Local DAP prices are currently around Rs2,650 per bag or Rs53,000 per ton.

The price of phosphoric acid (P2O5) is also expected to be revised upward in line with the increase in international DAP price in its next revision, which will normalise primary margins, said Nauman in his research report.

The current DAP primary margin amounts to $265 per ton.

Phenomenal Q4 yet to come for FFBL

The demand of DAP rises in the last four to five months of every calendar year (Rabi season), which results in strong earnings for FFBL, said Nauman.

The company’s performance is expected to remain dull in the second quarter of calendar year 2010, which gives investors an optimum opportunity to make healthy returns once demand per prices start to pick up to satisfy the need of Rabi sowing season, Nauman added.

“The scrip will start its upward trajectory during the third quarter, when investors will be looking at strong DAP numbers and higher earnings estimates,” Nauman further said.

Published in The Express Tribune, July 6^th, 2010.