Buy Rashtriya Chemicals; tgt of Rs 75: Firstcall Research

Firstcall Research’s report on Rashtriya Chemicals and Fertilisers 

“Rashtriya Chemicals and Fertilizers Limited (RCF) a Government of India Undertaking is a leading fertilizer and chemical manufacturing company with about 80% of its equity held by the Government of India. It has two operating units, one at Trombay in Mumbai and the other at Thal, Raigad district, about 100 KM from Mumbai. Government of India has accorded "Mini-Ratna" status to RCF. RCF is one of the earliest units set up in the country with a vision of growth in fertilizer production for food security. It manufactures Urea, Complex Fertilizers, Bio-fertilizers, Micro-nutrients, 100 per cent water soluble fertilizers, soil conditioners and a wide range of Industrial Chemicals. It produces 23 lac MT Urea, 6.5 lac MT Complex fertilizers and 1.6 lac MT of Industrial Chemicals every year. The company is a household name in rural India with brands "Ujjwala" (urea) and "Suphala" (complex fertilizers) which carry high brand equity. RCF has countrywide marketing network in all major states. Apart from the own manufactured products, the Company is also engaged in marketing of SSP and imported fertilizer inputs like, DAP, MOP & NPK fertilizers.”

“The company has achieved a turnover of Rs. 19697.60 million for the 3rd quarter of the current year 2014-15 as against Rs. 14075.00 million in the corresponding quarter of the previous year. EBITDA of Rs. 2055.10 million in Q3 FY15 and increase of 46.75% against the corresponding period of last year. In Q3 FY15, net profit of Rs. 943.10 million against Rs. 529.00 million in the corresponding quarter of the previous year. The company has reported an EPS of Rs. 1.71 for the 3rd quarter as against an EPS of Rs. 0.96 in the corresponding quarter of the previous year. The Company has approved for setting up 2 MWp PV Grid Connected Crystalline Solar Power Plant at Trombay, Mumbai including O & M of 5 years period. The total estimated cost of the project is Rs. 144.28 million.”

“At the current market price of Rs. 59.60, the stock P/E ratio is at 7.75 x FY15E and 6.37 x FY16E respectively. Earning per share (EPS) of the company for the earnings for FY15E and FY16E is seen at Rs.7.69 and Rs.9.35 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 8% and 22% over 2013 to 2016E respectively. On the basis of EV/EBITDA, the stock trades at 4.41 x for FY15E and 3.56 x for FY16E. Price to Book Value of the stock is expected to be at 1.16 x and 1.07 x for FY15E and FY16E respectively. We expect that the company surplus scenario is likely to continue for the next three years, will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs.75.00 for Medium to Long term investment”, says Firstcall Research report.

Read More