Buy GSFC; target of Rs 115: PLilladher

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26 Aug, 2025 12:21

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Prabhudas Lilladher`s research report on Gujarat State Fertilizers & Chemicals“GSFC believes that capro‐benzene spreads have bottomed out. Spreads which stood at US$900/mt in FY14 are currently ruling at US$1,050‐1,100/mt. Management expects gradual improvement in spreads from here on. Recent decline in crude prices would also help to improve spreads. We expect spreads to remain in US$1,100‐1,300/mt for the next couple of quarters. GSFC highlighted that they had raised prices by 10‐15% from Apr’14 itself to combat the likely increase in gas prices. However, GSFC's fertiliser MRPs is still lower when compared to peers/IPP linked prices, giving room for further price hikes. GSFC highlighted that fertiliser business can deliver stable margins of Rs2,500/mt over the medium‐term. Stable FX and lower discounts this year bode well for fertiliser margins.”  “We attended GSFC's Analyst Meet held on September 10, 2014. On the chemicals side, capro benzene spreads which stood at US$900/mt in FY14 are witnessing a gradual uptick. Current spreads are at US$1,050‐1,100/mt and management expects gradual improvement in spreads over the next few quarters. GSFC's plants continue to operate @110% capacity utilization. On the fertiliser side, MRPs were increased by 10-15% from Apr 2014 itself in anticipation of a gas price hike. However, GSFC's fertiliser MRPs is still lower when compared to peers/ IPP linked prices, giving room for further price hikes. GSFC expects fertiliser business to deliver stable margins of Rs2,500/mt. Stable FX and lower discounts this year bode well for fertiliser margins. On the capex side, WSF plant (revenue potential‐ Rs1.5bn) will be commissioned by Q3FY15E, nylon-6 plant (revenue potential ‐ Rs2.9bn) will be commissioned by Q4FY15E, D train at Sikka (revenue potential‐ Rs15bn) will be commissioned by Q3FY16E. We are modelling for EPS of Rs12.8/14.4 in FY15E/16E respectively. Given that stock has underperformed in the current rally, coupled with attractive valuations of 7x FY15E/6xFY16E earnings and 30% discount to BV, we expect valuations to catch up. We maintain ‘Accumulate’ with a revised target price of Rs115 (previous Rs90),” says Prabhudas Lilladher research report.  

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