Accumulate Rashtriya Chem; target of Rs 74: PINC Research

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Accumulate Rashtriya Chem; target of Rs 74: PINC Research

PINC Research is bullish on Rashtriya Chemicals and Fertilisers and has recommended accumulate rating on the stock with a target of Rs 74 in its February 2, 2012 research report.

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PINC Research is bullish on Rashtriya Chemicals and Fertilisers and has recommended accumulate rating on the stock with a target of Rs 74 in its February 2, 2012 research report.

"Rashtriya Chemicals & Fertilisers' (RCF) Q3FY12 results were lower than expectations as net grew by 4.0% YoY to Rs16.0bn (PINCe Rs16.2bn). OPM contracted by 265bps to 4.5% due to higher other expenditure on account of Rs834mn forex loss, resulting in operating profit of Rs724mn (-34% YoY). However, higher other income resulted in net profit de-growth of 20.8% YoY to Rs541mn (PINCe Rs656mn)."

"Due to shutdown at Urea plant and higher prices of complex fertilisers/ unavailability of raw material resulted in decline in sales volumes by 5.5% and 27.5% YoY respectively. Coupled with 41% increase in other expenditure resulted in contraction in operating margins to 4.5%. It includes Rs834mn of forex loss on account of ~11% depreciation in INR against USD in Q3FY12. Out of the forex loss, ~Rs700mn is the notional MTM loss on added inventory which is likely to get reversed in Q4FY12 if rupee remains strong."

"We have introduced FY14 estimates along with this update and have increased our earning estimates for FY13 by 8.7% factoring better margins post debottlenecking of Urea plant at Thal. At the CMP of Rs67, RCF is trading at PER of 14.3x & 11.4x and EV/EBITDA of 5.9x & 4.7x respectively for FY12 & FY13 estimates. We downgrade our recommendation on the stock to 'ACCUMULATE' on the back of recent rally in the stock price with an increased SOTP target price of Rs74 (10x PER FY13 and Rs15 for expected new capacity of 1.2mn MT p.a.)," says PINC Research report.   

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