Buy GSFC; target of Rs 140: Emkay

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26 Aug, 2025 12:21

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Emkay Global Financial Services research report on Gujarat State Fertilizers & Chemicals “GSFC, Revenues at Rs 14.8bn were up 4.5%yoy, though lower than our estimates of Rs 17bn. Revenue growth was impacted by lower than estimated revenues for both the segments. EBITDA at Rs 1.6bn was down 10%yoy and lower than our estimates of Rs 2.2bn. EBITDA margin at 11% was lower than our estimates of 13% due to lower than estimated chemical segment margins. APAT at Rs 1.2bn was down 4%yoy and lower than our estimates of Rs 1.5bn. Balance sheet though strengthened further during the quarter. We have cut our FY15E revenue/EBITDA/APAT by 12%/16%/10% respectively while we continue to maintain our FY16E. We reiterate our Buy rating on the stock with a target price of Rs140 as valuations continue to remain attractive.” “Fertilizer segment revenue at Rs 9.6bn was up 13.2%yoy, though lower than our estimates of Rs 10.7bn due to lower than estimated fertilizer sales volume. Volume growth impacted by lower than estimated production due to limited availability of phos acid. Further chemical segment revenue at Rs 5.2bn was down 8.4%yoy and lower than our estimates of Rs 6.3bn. EBITDA at Rs 1.6bn was down 9.7%yoy on the back of lower than estimated margins for the chemical segment. EBITDA margins at 11% were lower than our estimates of 13.2%. Increase in gas cost and power cost impacted profitability by Rs 150mn during the quarter. Consequently, APAT at Rs 1.2bn was down 4.2%yoy due to lower than estimated margins and revenues.” “Reduction in net debt led to significant improvement in balance sheet strength with net debt reducing by Rs 4.6bn between FY14 and H1FY15. Going forward, with the commissioning of the nylon 6 expansion, water soluble fertilizer plant and completion of dredging at the Sikka unit we expect revenue growth momentum to continue in FY16E. Further with significant reduction in system inventories and increase in global DAP prices, the management expects supply to remain tight in H2FY15. We have cut our FY15E revenue, EBITDA and APAT by 12%/16%/10% respectively while we continue to maintain our FY16E. We continue to maintain our Buy rating on the stock with a target price of Rs140,” says Emkay Global Financial Services research report.

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