Reduce Chambal Fert, says PINC Research

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Reduce Chambal Fert, says PINC Research

PINC Research is bearish on Chambal Fert and has recommended reduce rating on the stock in its January 17, 2012 research report.

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RELATED NEWS Buy South Indian Bank; target of Rs 31: Aditya Birla Money Buy ING Vysya Bank; target of Rs 491: Nirmal Bang Buy HCL Tech; target of Rs 494: KRChoksey ALSO READ See previous views by PINC Research See what other Experts & Brokerages are saying about Chambal Fert See messages about Chambal Fert Chambal Fert BSE | NSE 01/06/12 Are Mutual Funds betting on Chambal Fert?

PINC Research is bearish on Chambal Fert and has recommended reduce rating on the stock in its January 17, 2012 research report.

"Chambal Fertilisers' (CFCL) Q3FY12 standalone net sales were better than our expectations as net sales grew by 32% YoY to Rs17.8bn (PINCe Rs14.9bn) led by higher trading volumes. OPM contracted by 614bpsYoY to 10.8% due to loss in shipping/textile division and higher trading. Change in tax policy for shipping has resulted in exceptional tax outgo of Rs929mn in Q3FY12. Consequently, CFCL incurred net loss of Rs12mn (PINCe Rs902mn) against profit of Rs1.1bn in Q3FY11."

"Increase in traded fertilisers volume (+ 25%YoY), coupled with higher realisation led to 58% increase in traded revenue to Rs7.9bn. Despite flat volume for manufactured urea, revenue grew by 18%YoY to Rs8.1bn due to higher subsidy (owing to higher gas cost). Shipping division has reported loss of Rs34mn at EBIT. Change in tax policy from tonnage tax to normal tax regime w.e.f. 1 Apr 2011 led to exceptional deferred tax of Rs1.9bn to be charged in the H2FY12 (Rs929mn charged in Q3FY12). Withdrawal of the proposal of demerger of shipping division into India Steamship due to failure of negotiation with lender and change in tax regime signals weak outlook for shipping in the coming years. However, tax regime change should result into decrease in effective tax rate to ~27-28%."

"We are introducing FY14 estimates with this update. At CMP of Rs79, CFCL is trading at PER of 10.8x & 9.2x and EV/EBITDA of 6.3x & 5.5x for FY12E & FY13E respectively. We upgrade our recommendation from 'SELL' to 'REDUCE' with a target price of Rs 85 (10x FY13E EPS) on the back of recent stock price correction. We have not yet factored any incremental value for new planned Urea expansion (which may be ~Rs10/share at NPV), however, CFCL is all set for expansion in the case of favorable policy," says PINC Research report.  

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