Complex fertiliser sales down 50% in April: PLilladher
Prabhudas Lilladher has come out with its report on fertiliser sector. The research firm expects urea demand to remain steady, complex fertiliser sales continues to remain under pressure due to wide differential in urea v/s complex fertiliser prices and huge inventory in system.
Prabhudas Lilladher`s research report on fertiliser sector
Preliminary data from the Ministry of Fertilisers indicates that sales volumes of overall complex fertilisers (incl. manufactured & traded) declined by 50% YoY for the industry during Apr.13. On the contrary, urea sales increased by 6% YoY during the same period. Imported complex fertilisers witnessed decline of 56% YoY during Apr.13 as companies refrained from importing due to delay in subsidy fixation as well as huge inventory in system. Similarly, manufactured complex fertiliser volumes declined by 47% YoY during Apr.13.”“While we expect urea demand to remain steady, complex fertiliser sales continues to remain under pressure due to wide differential in urea v/s complex fertiliser prices and huge inventory in system. Though few companies have already announced reduction in farm gate prices of complex fertilisers, the bigger challenge is the existing inventory in system which will be sold at reduced prices. Our channel checks/interactions with industry suggest that major portion of the loss will have to be borne by the companies. However, companies have already passed significant part of the reduction in the form of dealers discounts, promotional offers etc. We maintain 'Buy' on Chambal Fertilisers and 'Accumulate' on Coromandel, GSFC, Tata Chemicals and Deepak Fertilisers. Complex fertiliser sales continue to face demand headwinds: Preliminary volumes data for Apr’13 indicates that sales volumes of overall complex fertilisers (incl. manufactured & traded) declined by 50% YoY for the industry. On the contrary, urea sales increased by 6% YoY during the same period. Complex fertiliser sales continue to face demand headwinds due to windfall increase in their prices over the last two years. Our channel checks suggest that farmer is reluctant to purchase complex fertiliser at such high prices despite his crop economics remaining favourable. Reduction of farm gate prices on existing inventory has emerged as a new problem for industry: Complex fertiliser industry, which was already grappling with the slide in demand and consequent build-up of inventory, is now facing another challenge. Though few companies have already announced reduction in farm gate prices of complex fertilisers, the bigger challenge is the existing inventory in the system which will be sold at reduced prices. Our channel checks/interactions with industry suggest that major portion of the loss will have to be borne by the companies. However, companies have already passed significant part of the reduction in the form of dealer discounts, promotional offers etc. during the last few quarters. Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies 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. 
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