Chambal Fertilisers & Chemicals Ltd - Rising on urea price escalation :: Unicon

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Chambal Fertilisers & Chemicals Ltd -  Rising on urea price escalation and talks of decontrol

• Chambal Fertilisers & Chemicals Ltd (CHMB) posted Q1 FY12 results inline with Unicon estimates. Total Income grew by 21.3% YoY to INR 11,839mn in the quarter.
• EBITDA remained flat around INR 1.7bn while EBITDA margin contracted by 300bps to 14.6%YoY.
• Net profit also remained flat around INR 640mn while net profit margin shrunk by 118bps to 5.4% YoY.

Outlook and Valuations

CHMB would benefit from growing urea demand on the back of healthy monsoon in 2011, rising urea prices (currently USD 550 per tonne), demerger of shipping business and talks of urea decontrol. Change in Urea investment policy provides further opportunity for capacity expansion. Stock is trading at 10.7x its FY13E earnings. We recommend ACCUMULATE with a price target of INR 113.

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Unicon Wealth Research