Jul 22, 2011, 01.42 PM IST | Source: Moneycontrol.com

Hold Rashtriya Chemicals; target of Rs 69: PINC Research

PINC Research has recommended hold rating on Rashtriya Chemicals and Fertilisers with a target of Rs 69, in its July 20, 2011 research report.

Hold Rashtriya Chemicals; target of Rs 69: PINC Research

PINC Research has recommended hold rating on Rashtriya Chemicals and Fertilisers with a target of Rs 69, in its July 20, 2011 research report.

Rashtriya Chemicals & Fertilisers (RCF) Q1FY12 results were below our expectations as net sales increased by 9.7% YoY to Rs8.7bn. OPM contracted by 268bps to 2.7%, resulting in operating profit of Rs236mn (- 45% YoY). Higher depreciation cost dragged the result further with adj net profit down by 75.2% to Rs49mn (PINCe Rs187mn).

There was an exceptional elongated shutdown at Trombay unit for 63 days due to compessor failure. This resulted in loss of ~Rs210mn YoY due to production loss and de-growth of 80% YoY at PBIT for Trombay unit. RCF is increasing its Urea capacity at Thal through de-bottlenecking by 0.26mn MT (linked to IPP) and reducing energy consumption by ~0.4Gcal/MT of Urea for the whole unit (completely retained by RCF for five years as per current policy). Additional capacity is expected to become on-stream in H2FY12. Govt is planning to introduce NBS for gas based Urea players (in five different groups with differential subsidy). Proposal is for a 10% price hike at farm-gate and partial decontrol going forward. This should be positive for RCF and should result in 15-20% upward revision in EPS estimates on full year basis. We expect NBS policy announcement before Rabi season (i.e. Oct11), however, new Investment Policy for Urea should get further delayed on the back of ambiguity related to RIL KG gas. RCF is also looking out for opportunities to put up Urea facility in gas rich African nation and is also a front runner for opportunities regarding revival of sick units.

At CMP of Rs76, RCF is trading at PER of 16.1x & 14.0x and EV/ EBITDA of 6.9x & 5.8x respectively for FY12 & FY13 estimates. We maintain our 'HOLD' recommendation with a decreased SOTP target price of Rs69 (10x PER FY13 and Rs15 for expected new capacity of 1.2mn MT p.a.). Any development regarding the commercial usage of large land bank at Chembur and disinvestment (not valued in our estimates) will be the positive triggers, says PINC Research report.

See which companies promoters have reduced stake in last quarter?

Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

To read the full report click here

Set email alert for

ADS BY GOOGLE

Buy & sell politicians on Power Play
- the political stock exchange

Price Update

Narendra Modi

81489.12 1,480.51 1.85%

4937

Bought today

1866

Sold today

1.42%

User holding

video of the day

Ambit Cap eyes two years of market cheer; bets on cyclicals

Explore Moneycontrol

Copyright © e-Eighteen.com Ltd. All rights reserved. Reproduction of news articles, photos, videos or any other content in whole or in part in any form or medium without express written permission of moneycontrol.com is prohibited.