Accumulate Chambal Fertilisers; target of Rs 98: Emkay

Emkay Global Financial Services is bullish on Chambal Fertilisers and Chemicals and has recommended accumulate rating on the stock with a target of Rs 98 in it November 6, 2012 research report.

“Chambal Fert reported revenues of Rs 23.4bn, 43% yoy (est of Rs 19.5bn) driven by higher trading. Trading reported revenues of Rs 12bn, 78% yoy (against est of Rs 8.6bn) led by higher volumes. Urea revenues stood at Rs 9.3bn, 23% yoy (against est of Rs 8.9bn). Shipping reported revenues of Rs 735mn, -25% yoy lower than est of Rs 984mn while textiles reported revenues of Rs 1bn, 15% yoy in line with est. EBITDA for the quarter stood at Rs 2.0bn, -5% yoy (est of Rs 2.3bn) with margins of 8.3% (est of 11.7%). EBITDA margin disappointment was primarily due to higher contribution of trading (which carries lower margins) & low margins in manufactured urea.”

“Chambal reported adjusted PBT of Rs 1.3bn, 7% yoy (est of Rs 1.5bn). APAT for the quarter stood at Rs 896mn, 7% yoy (est of Rs 1bn). APAT has been adjusted for Rs 109mn of profit on sale of ship included in other income. APAT has also been adjusted for Rs 119mn of FX gains (for FY12) shown as exceptional inc & Rs 41mn of FX gain (for Q1FY13). Change in accounting policy wef. April 1, 2011 with respect to borrowing costs led to the company accounting for the FX difference arising from FX borrowings.”

“Though Q2FY13 performance was muted, urea business remains strong due to steady demand at the farmgate level. Company’s enhanced focus on trading is likely to support profitability going forward. We maintain accumulate with target price of Rs 98. Stock is currently trading at attractive valuations of 6.7x FY14 earnings (historically, Chambal has traded in the PE band of 6-17x with an average of 9.5x). Any announcement on New Urea Investment Policy would act as a positive trigger,” says Emkay Global Financial Services research report.

Institutional holding more than 40% in Indian cos

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