Fertiliser stocks get decontrol boost; analysts say buy

Moneycontrol Bureau

Fertilizer stocks like Rashtriya Chemicals and Fertilizers, Chambal Fertilizers, Nagarjuna Fertiliser and National Fertilizers surged 2-5% Monday after a group of ministers headed by Finance Minister Pranab Mukherjee late last week cleared a proposal to free urea prices. As per the draft policy, fertilizer companies will be able to raise the rate of key farm nutrients by 10% in the first year, and starting second year will have the complete freedom to fix the maximum retail price of urea based on market dynamics, a report by CNBC-TV18 said. Analysts say this reform would be a a huge positive for the fertilizer companies and a re-rating of the stocks was imminent. "Given a move away from an hitherto archaic fixed return regime, and strong tailwinds on higher urea prices, the sector fundamentals have improved immensely leading to resurgence of investor interest," said Gauri Anand and Saurabh Rathi of MF Global. The analysts further said that they see a significant improvement in earnings from this move given that companies like Chambal Fertilizers and Nagarjuna Fertilizer were also divesting non-core, lower margin and capital sucking businesses. MF Global reiterated a "buy" on Nagarjuna Fertilizer and Chambal Fertilizers, with a price target of Rs 50 and Rs 135 a share respectively. Rohan Gupta and Balwindar Singh of Emkay Global Financial Services too feel that the government move will be positive for fertilizer companies once the policy is implemented. The two analysts have a "buy" on Chambal Fertilizers and "accumulate" on Tata Chemicals. Chambal Fertilizers & Chemicals shares were up 4.9% at Rs 97.35, Nagarjuna Fertilizer was up 1.1% at Rs 32.30, National Fertilizers was rose 3.4% at Rs 87.45, RCF was up 2.7% at Rs 77.60 and Tata Chemicals was up 0.6% at Rs 354.40 on NSE on Monday. Nachiket Kelkar
nachiket.kelkar@network18online.com