Reduce GSFC; target of Rs 350: Emkay

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26 Aug, 2025 12:21

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Emkay Global Financial Services is bearish on Gujarat State Fertilizers Company (GSFC) and has recommended reduce rating on the stock with a target of Rs 350 in its August 6, 2012 research report.

“GSFC reported revenues of Rs 14.1bn, 17% yoy ahead of est of Rs 11.8bn driven by higher chemicals revenues. Record production achieved in chemicals and intermediaries during the quarter drove chemical revenues. EBITDA Rs 2.4bn, -13% yoy, was above est driven by higher chemical revenues while margins were in line with est. Higher than est other income and lower depreciation (Caprolactam plant fully depreciated) also had positive impact on profit with GSFC reporting PAT of Rs 1.7bn, -3% yoy (against est of Rs 1.3bn) and EPS of Rs 21.7.”

“GSFC restated chemical revenues (included ammonia which earlier was in fertilizer). Chemicals revenues stood at Rs 5.2bn, 33% yoy, ahead of est. Higher utilization at chemical / intermediates plant achieved during the quarter boosted revenue growth. However realization / spread of key product Caprolactam remains weak resulting into EBIT margins of 22% (35% previous year) and is likely to remain under pressure (we est 17%). Own manufactured fertilizer volumes declined by ~35% due to lower availability of phos acid however significant trading of Rs 3bn compensated for loss in fertilizer revenues though margins declined to 11.5% (15.7% previous year)”

“Though the average caprolactam-benzene spread for Q1FY13 stood at US$1350/mt, the same has declined to US$ 1100/mt at present and is likely to put pressure on company’s profitability in near term. Poor monsoon and lower raw material availability has increased concerns on fertilizer business in FY13. Driven by higher other income and lower depreciation we have aligned our FY13 est by +4% to Rs 68.5. We await for reversal in chemical spreads and maintain our REDUCE rating on the stock with price target of Rs 350,” says Emkay Global Financial Services research report.

Institutional holding more than 40% in Indian cos

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