Accumulate Chambal Fert; target of Rs 98: Emkay

“Chambal Fert reported revenues of Rs 13.6bn, 17% yoy higher than est of Rs 9.8bn driven by higher sales volumes of manufactured urea & trading of complex fertilizers. Despite undertaking maintenance shutdown of ~35 days during the quarter, own manufactured urea reported revenues of Rs 8.8bn, 25% yoy higher than est of Rs 6.3bn driven by higher urea volumes. Manufactured urea sales volumes stood at 522,000mt, - 6% yoy for Q1FY13. Trading volumes for the quarter stood at 44,000mt & drove trading revenues. Trading reported revenues of Rs 3bn, 5% yoy (against est of Rs 1.8bn). Shipping reported revenues of Rs 884mn, flat yoy (est of Rs 1.05bn) while textile revenues stood at Rs 946mn, 33% yoy (est of Rs 714mn).”

“Despite Gadepan I & II fertiliser plants being under planned shutdown for 25 days and 9 days respectively during the month of April 2012, manufactured urea volumes of 522,000mt surprised positively. Urea business performance remained encouraging with segment reporting EBIT margins of 14.2%. Trading business also remained strong with margins of 13.9% and revenue contribution of Rs 3bn, 5% yoy. Though core fertiliser business remains strong, however shipping continues to drag profitability. Shipping reported revenues of Rs 884mn, flat yoy (est of Rs 1.05bn) with margins of 1.4%. Chambal reported EBITDA of Rs 1.9bn, 7% yoy higher than est of Rs 1.6bn driven by higher topline. However, EBITDA margin at 14.0% was lower than est of 16.7% due to lower margins in shipping. APAT for the quarter stood at Rs 812mn, 11% yoy higher than est of Rs 650mn. APAT has been adjusted for net mark to market loss of Rs 37mn and Rs. 4mn for shipping and fertiliser division resp. of the company. AEPS stood at Rs 2.0.”

“Urea business remains encouraging with strong demand at the farmgate level while trading business impressed with higher margins. We expect trading margins to remain strong in next quarter as company is holding inventory at end of this quarter which might get liquidated in next quarter and fetch higher realizations. Maintain Accumulate with target price of Rs 98. Any announcement on New Urea Investment Policy would act as a positive catalyst,” says  Emkay Global Financial Services research report.

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