Fertiliser Sector Update |
Q2FY12 performance remains encouraging |
n Q2FY12 results for agri-inputs universe (ex Tata Chemicals, results pending) has been encouraging with revenues and APAT above our est by 10% and 14%, respectively
n Companies’ fertiliser division performance has been encouraging due to sharp increase in fertiliser prices despite 140bps yoy / 80bps qoq decline in EBIT margins to 11.7%
n Chemical segment margins also remain robust with EBIT margins at 30% (+20bps yoy / 150 bps qoq)
n Post the results we have upgraded earnings for DFPCL while Rallis has seen downgrade. Chambal (upgrade) has been adjusted for withdrawal of its shipping demerger
n Managements outlook on agri business (fertilisers and agrochemicals) remain positive on account of encouraging outlook for Rabi crop and strong farm produce prices
n We expect that while rising input cost may put pressure on chemical segment margins in subsequent quarters global slowdown may also hurt demand
n Raw material availability for complex fertiliser remain our key concern while any further price increase in complex fertiliser prices may hamper fertiliser demand
n UPL and DFPCL are our top pick post the results along with GSFC (BUY on attractive valuations) and Coromandel (earnings momentum to continue)
n We also recommend BUY on Tata Chemicals pre results on expectation of strong Q2FY12 results
Company |
CMP |
TP |
Current |
Previous |
Earnings change |
|
FY12 |
FY13 |
|||||
Chambal Fertilisers |
88 |
98 |
Accumulate |
Buy |
3% |
-4% |
Coromandel Int'l |
333 |
435 |
Buy |
Buy |
NA |
NA |
Deepak Fertilisers |
165 |
250 |
Buy |
Buy |
6% |
10% |
GNFC |
91 |
135 |
Buy |
Buy |
NA |
NA |
GSFC |
461 |
530 |
Buy |
Buy |
NA |
NA |
Rallis India |
160 |
197 |
Buy |
Buy |
-10% |
-6% |
United Phosphorus |
142 |
215 |
Buy |
Buy |
1% |
0% |
Tata Chemicals |
312 |
400 |
Accumulate |
Accumulate |
NA |
NA |
Source: Emkay Research
*Tata Chemicals will declare its results on 11th Nov, 2011
Regards,
Rohan Gupta |
Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : rohan...@emkayglobal.com |
Board No. : +91-22-66121212 | Extn. : 248 | DID : 66121248 | Mob : +919619321479 | |
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