GSFC - Event Update; Strategic investment to secure potash availability; Hold; Target: Rs70

[Rajesh Desai]

Event Update (January 14, 2013)

Event Update Gujarat State Fertilizers & Chemicals Ltd Reco: HOLD CMP: Rs 70 Target Price: Rs 70 Strategic investment to secure potash availability · GSFC has entered into a strategic pact with Karnalyte Resources to secure its long term potash supply arrangement. GSFC will acquire 19.98% stake in Karnalyte at total consideration of C$45mn (Rs 2.5bn) · GSFC has committed for an offtake of 350,000 mt p.a. from the 1st phase of the mine near Wynyard, Saskatchewan, which would increase to 600,000 mt p.a. as capacity increases during Phase 2, for a period of 20 years · We believe this arrangement will help to secure potash availability for GSFC in the longer term & strengthen its product portfolio. Phase-1 is currently in construction & it would take around 3-4 years to start commercial production · Maintain HOLD with target price of Rs 70. At CMP of Rs 70, stock trades at 4.8x FY14 earnings of Rs 14.8, EV/EBITDA of 2.5x Click here to read report: Event Update

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CA. Rajesh Desai