Misr Fertilizers Production Company (MOPCO) aims to make adjustments to its production lines to increase urea production to 195 tonnes per day. The research of Al-Ahly Pharos Securities Brokerage revealed that the total increase in urea production after the amendments will reach 70,000 tonnes annually. It added that the new melamine plant will be implemented in the Damietta Free Zone at a total cost of $260m and is expected to produce 60,000 tonnes of melamine annually. The project will be 100% financed through loans that will be repaid through the project's profits, and the implementation schedule will be two years. The company said that the new project will add value because the international prices of melamine are three times the prices of urea, and it is likely that the project will add to the fair value of the share between EGP 25-35. Pharos expects a positive future outlook for MOPCO, supported by the rise in urea prices, as tensions between Russia and Ukraine led to an increase in prices. The average urea index in Egypt was $790 per tonne in March 2022, compared to February's $693 per tonne. Pharos added that there is another factor, which is the domestic share and whether it will remain at 65% of production or drop down to 55% or less. It is expected to remain at 55% for the time being. Liberalising the local market or maintaining the price of EGP 4,500 per tonne for the local quota is another major factor in the evaluation, assuming that EGP 4,500 will be kept without changes. Pharos' research attributed the rise in the quarter's revenues to the rise in exports and domestic urea prices, as Egypt's global urea index recorded $889 per tonne, which is 87% higher on a quarterly basis and 2.3 times higher on an annual basis. Additionally, subsidised local prices will change to become EGP 4,500 per tonne, compared to EGP 3,200 per tonne. The research added that MOPCO demonstrated its strength across all profitability indicators thanks to the high export prices of urea, which averaged $526 per tonne in 2021, compared to 2020's $254 per tonne. It also stated that the company showed an improvement in its operating profits on a quarterly basis thanks to the rise in interest income, as interest income exceeded interest expenses, bringing net interest income to about EGP 21m, compared to net interest expenses of EGP 11m in the third quarter (3Q) of 2021 and EGP 62m in (4Q) of 2020. Furthermore, MOPCO achieved profits of EGP 4.79bn during the period that started in January to December 2021, compared to profits of EGP 2.487bn in 2020, with a growth rate of 92.5%. The sales witnessed a growth of 39.9% during the past year to EGP 10.26bn, compared to EGP 7.33bn in 2020. Earnings per share rose by 117.8%, as the basic share amounted to EGP 20.91 in 2021, compared to EGP 9.6 in 2020. Total debt decreased to EGP 2.5bn, compared to EGP 3.16bn in September 2021 and EGP 4.89bn in December 2020. Net cash amounted to EGP 1.892bn during the period, compared to EGP 295m in September 2020. The research set the target price for the share of MOPCO at EGP 126.75 per share with a recommendation to increase the relative weights.
