Verde Agritech Ltd T.NPK

Converting MOP prices into pricing for Verde's product.

[KirklandX]

I have just been doing some work on what these high MOP prices should mean for Verde.
 
I see the situation as this:
 
1. The reference price for Verde’s product is based directly off the MOP price. More specifically, is it based off the MOP CFR Brazil price (this is the price of MOP delivered to port in Brazil) + cost of transport inland to the farmer.
 
2. So the equation is, Verde ref price = MOP CFR Brazil + transport inland
 
3. So currently Verde ref price = C$1,580 (US$1,250) + C$60 (US$50, this is the best quote I could find). So currently Verde ref price = C$1,640.
 
4. Verde’s product has 1/6 the potassium content of MOP, and I believe it is priced directly off this metric. So currently Verde should be selling a tonne of product at around C$1,640 (their reference price) / 6 = C$273.
 
5. This C$273 price per tonne of Verde product is obviously on a CIF bases, i.e. that includes Verde paying the transport cost to get the tonne of product to the farmer.
 
6. So next question, what is the price for Verde to deliver a tonne of product to the customer? Through 2021 is was between C$40 and C$45 per tonne. Let’s increase that due to the increase in oil prices to say C$60. So on a FOB bases, i.e. revenue per tonne to Verde once you’ve taken out transport cost, Verde should now be selling product at C$272 (CIF price they receive) – C$60 (cost of transport per tonne) = C$212.
 
7. Just to repeat that, currently Verde should be receiving OVER C$200 FOB per tonne of product sold, after transport costs have been accounted for.

8. This price is against Verde receiving in the last quartre C$81 CIF / C$53 FOB per tonne. 
 
This is incredible. A couple of additional points. Yes, I have not included sales discounts that may apply in some circumstances. But, I have also not included the positive pricing dynamic of the BAKS product, the uplift Verde get from mixing in additional nutrients.
 
Bottom line, as they scale up through 1m tonnes of production, to 3m tonnes, to 10m tonnes(?), Verde will be making huge cashflows. For one thing, guidance is going to be revised upwards for sure. And they will no doubt beat their own revised guidance.
 
I’m new here. But this is incredibly exciting.
 
GLTA

[Tutur529]

Hello KiklandX, You can find Verde's product price there : Verde's product price

[KirklandX]

Amazing! Thank you! So it seems I'm in the right ball park.  I can see here that K Forte (the basic product, no add minerals like BAKS) is quoted at R$1,042 per tonne. FX rate for C$ / R$ is 3.7. So that is C$281 per tonne of K Forte.  I guess (in the worst case) this must be on a CIF bases, i.e. that Verde is paying the transport with that price. So again if we factor in a

[ICT1111]

Hi KirklandX I agree with your analysis and also your conclusion that no distributer discounts are included in your pricing model (which will serve to reduce overall margin) there is also the factor of legacy contracts signed in H2 2021 at lower prices for 2022 delivery which might have dominated our deliveries in Q1 and also influenced our margin in Q2...... aside from that....... if the

[KirklandX]

Hi. Thanks for the comment. You are absolutely right - some legacy sales would have been made in 2021, that will make up some of the deliveries in 2022 (locked in at 2021 prices). But I guess the flip side is also true - we will now be making sales now, and looking in these price levels, for delivery later in 2022, but ALSO 2023. Which when you think about it is amazing. Especially as we are