Hold Chambal Fertilizers and Chemicals; target of Rs 300: Prabhudas Lilladher

Prabhudas Lilladher recommended hold rating on Chambal Fertilizers and Chemicals with a target price of Rs 300 in its research report dated May 30, 2023.

Broker Research

May 31, 2023 / 08:28 IST

hold

26 Aug, 2025 12:21

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Prabhudas Lilladher's research report on Chambal Fertilizers and Chemicals

Chambal Fertilizers (CHMB) reported disappointing results with Revenue/EBITDA/PAT growth of 9%/-70%/-50% YoY lower than our and consensus estimates. Despite revenues up 9% YoY to Rs35.9bn, margins were severely impacted led by provisions of ~Rs2.0bn of high cost inventory in 4Q’23 (for FY23 provisions of ~Rs4.5bn). Going forward, management alluded that most provisions for high cost inventory are largely behind, however they remained cautious on further cut in subsidy rates during 2HFY24. Further, robust subsidy disbursement from Govt. in FY23 coupled with falling RM cost scenario will likely keep working capital at comfortable levels along with healthy balance sheet. However, lack of earnings growth visibility in core business and delayed capacity expansion in TAN business (3QFY26) may keep stock performance under check. Downgrade to ‘HOLD’.

Outlook

We trim our FY24/25E EPS estimates by 14%/15% each and downgrade our rating to ‘HOLD’ from ‘BUY’ with revised TP of Rs300 (based on 9XFY25 EPS) (Rs360 earlier) citing a) flat volume growth and lower margin visibility from Non-urea traded business; b) expectations of another round of NBS subsidy reduction from Govt. in 2HFY24, amid a falling RM cost scenario; and c) limited growth visibility in urea business.

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