Visit http://indiaer.blogspot.com/ for complete details �� ��
5.6x FY2012E
CMP : Rs372
RECO : BUY
TP : Rs530
Investment Rationale
§ GSFC is one of the biggest beneficiary of the recently introduced nutrient based subsidies (NBS) on account of
its captive ammonia production facility
§ Ongoing TIFERT project for phos acid capacity for 3.6 lac mtpa will boost raw material availability (by 1.8 lac
mtpa) by FY11-12, which will further boost company’s volume growth
§ GSFC’s chemical business primarily includes Caprolactum and Nylon, is expected to improve further on account
of improvement in domestic tyre industry
§ Further company has expansion plans for few of its chemical products which include methanol, caprolactum,
melamine to support its chemical business
§ The company reported excellent Q2FY11 numbers with fertilizers EBIT tripling, chemicals EBIT doubling while
PAT growing by 168% yoy.
§ We expect EBIT contribution from fertilizer business to increase from 46% in FY10 to 56% in FY12E. The
higher share of fertilizer profits increases the overall visibi lity of earnings and could result in the scrip
commanding higher valuations.
Valuations
§ Driven by improved fertiliser profitability, we expect company to report earnings CAGR (FY10-12E) of 44%.
GSFC also has strong investment book of Rs 6.5 bn (Rs 80 / share) in quoted equities. At current price, the stock
trades at 5.6x FY12 EPS, EV / EBITDA of 2.4x and 1XPBV.
No comments:
Post a Comment