Accumulate Chambal Fert; target of Rs 98: Emkay

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Accumulate Chambal Fert; target of Rs 98: Emkay

Emkay Global Financial Services is bullish on Chambal Fert and has recommended accumulate rating on the stock with a target of Rs 98 in its January 17, 2012 research report.

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Emkay Global Financial Services is bullish on Chambal Fert and has recommended accumulate rating on the stock with a target of Rs 98 in its January 17, 2012 research report.

"Chambal Fertilisers reported revenues of Rs 18bn, +32% yoy, in line with our est. Manufactured fertiliser revenues increased by 18% yoy to Rs 8bn against est of Rs 7.2bn while trading reported revenues of Rs 8bn, 58% yoy, in line with est. Shipping segment reported revenues of Rs 1bn, 47% yoy (est of Rs 800mn) and textiles reported revenues of Rs 838mn, -16% yoy (against est of Rs 1.05bn). Manufactured urea volumes for the quarter stood at 580,000mt, 44% yoy."

"Chambal reported EBITDA of Rs 2bn, -4% yoy above our est of Rs 1.7bn. EBITDA margin of 11.4% was above our est of 10.2% driven by higher trading margins & lower than expected losses in textiles and shipping division. Shipping segment reported losses of Rs 43mn against est of Rs 97mn while textiles segment reported losses of Rs 19mn against est of Rs 105mn. Manufactured fertiliser segment reported profits of Rs 1.1bn (margin of 14% against est of 15%). Trading reported profit of Rs 482mn (trading margins 6% against est of 2%). Company reported PBT of Rs 1.1bn, -18% yoy, above est of Rs 894mn. APAT for the quarter stood at Rs 862mn, -5% yoy (est of Rs 626mn). Chambal has shifted from tonnage tax regime in shipping business (under which it was paying fixed annual tax of ~ Rs 50mn) to normal tax regime based on profitability. With this change company expects to reduce its effective tax rates (current ~30%) by 4-5% due to losses in shipping segment. As a result of this shift, deferred tax liability of Rs 1.86 bn has been created of which Rs 929mn is booked in current quarter while balance Rs 929mn is to be created in next quarter. APAT has been adjusted for deferred tax liability of Rs 929mn & Rs 44mn of tax credit received for earlier years."

"We expect company to report benefit of higher urea production above cut off in Q4FY12. Expected policy announcement on new urea investment should also have positive impact on company. We maintain our FY12/FY13 est at Rs 9.0 / 8.9 and reiterate Accumulate rating on the stock with target price of Rs 98," says Emkay Global Financial Services research report.    

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