Rama Phosphates may rally upto Rs 60: SP Tulsian

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Rama Phosphates may rally upto Rs 60: SP Tulsian

Rama Phosphates may rally upto Rs 60 in next 6- 8 months time, says SP Tulsian, sptulsian.com.

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Rama Phosphates may rally upto Rs 60 in next 6- 8 months time, says SP Tulsian, sptulsian.com.

Tulsian told CNBC-TV18, "Rama Phosphates is a very interesting play. They are makers of single super phosphates, which we usually call as complex fertilizer, one of the branch and this company has 3 plants, one at Udaipur, one at Indore and one at Pune. For making single super phosphate, you react rock phosphate with the sulphuric acid and the process is very simple. In fact you don't need much of the capital investment for making these types of things. So in the aggregate capacity of the company, at 3 locations are close to 4,60,000 tonnes."

He further added, "If you see the Single Super Phosphate (SSP) post it's nutrient based pricing happening from since last year that is June 2010, the fortunes of the company have really changed. The EPS, which was at about Rs 17 on a topline of close about Rs 400 crore for FY11. Now that EPS is placed 12 for first half. If you see the SSP industry, if I take the total scenario, their total capacity utilization has been at about 55%, largely because non-availability of rock phosphate. Rock phosphate is only available in the country in Rajasthan or it is imported. So the positive of the raw material is the main hurdle for not increasing the capacity utilization of these companies, but these company has very smartly, they have set up their plant at Udaipur where they source the rock phosphate and in fact that is giving them an advantage and capacity utilization of close to about 75%."

"Generally, there is an impression that fertilizer companies tend to perform well in the first half because of the good offtake in Kharif season, but I don't think that that will be the case with this company. I am expecting that probably their financial performance will be evenly out at all the four quarters and in the recent past, about 18 months back when the company was BIFI promoters have infused a huge funds at Rs 30 per share, raise their promoters stake at 82% and in fact that is again a very positive factor for the stock."

"If you take the debt portion also, it's about Rs 35 crore in the books of the company, which are largely for financing the working capital of about Rs 80-90 crore. So taking all this into consideration, expected EPS of 20-23 and I am expecting that this kind of EPS is likely to get maintained by the company for the next couple of years 20 plus. So the share is ruling at a PE multiple of 2, which is the least for any fertilizer company. There are very few SSP makers like Basant Agro or maybe Khaitan Chemicals. So this is very much comparable for ruling (check) quite low, I am expecting that probably share can move to Rs 60 in the next 6-8 months time."