GNFC Chemical business continues to do well BUY ::Emkay

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GNFC

Chemical business continues to do well

BUY

CMP: Rs 103                                       Target Price: Rs 157

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n     Q4FY11 APAT (adjusted for insurance claim of Rs 1 bn) of Rs 699 mn against loss of Rs 383 mn previous year were below estimates mainly due to lower than expected margins

n     Chemical segment witnessed attractive results with EBIT margins of ~28% (+300 bps yoy). Fertiliser segment margins remain at meager level of ~2%

n     Increase in Nitric Acid capacity (by ~70%) to support revenue growth in FY12E while commissioning of Ethyl Acetic and TDI plant to add revenues in FY13E

n     Maintain FY12E estimates at Rs 22.4 and introduce FY13E estimates at Rs 26.5. However we maintain our TP of Rs 157 (7x FY12 EPS) due to volatility in earnings, maintain BUY