Cairo – Mubasher: Pharos Research has maintained their 'Equalweight' recommendation for Abu Qir Fertilizers on a fair value (FV) of EGP 25, according to a recent report on Monday.

Abu Qir's revenues rose by 48% quarter-on-quarter and 56% year-on-year to EGP 2.196 million for the second quarter of fiscal year 2017/2018 on the back of an increase in Middle East granular urea prices and the hike of local subsidized urea prices in Q2-17/18, Pharos said.

The research company has attributed the gross margin expansions by 42% in Q2-17/18 to higher prices since “the cost of sourcing natural gas is fixed at $4.50/mmbtu”.

Abu Qir’s net profit dropped by 8% year-on-year to EGP 781 million in Q2-17/18, with net profit margin expanding by 4ppts, the report added.

“We believe that the rally in urea prices seen in 2QFY17/18 was due to a shock on both the demand and supply side. On the supply side, natural disasters in the US as well as a reduction in Chinese production tightened the global Urea market,” the research company continued.

Pharos forecast normality to be restored eventually in global Urea markets in 2018, when urea prices are likely to stand at $247 per tonnes for the full calendar year, reflecting the excess Urea supply.