GNFC:: Chemical business disappoints - BUY :Emkay

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GNFC

Chemical business disappoints

BUY

CMP: Rs100                                        Target Price: Rs135

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n     Q1FY12 APAT of Rs 417mn (against loss of Rs Rs 227mn due to ammonia plant shutdown previous year) disappointed us on back of dismal performance of chemical segment

n     Chemical segment reported lower margins of 17.0% (+380bps yoy/-1070bps qoq) against expectation of 27.0%. Fertilizer segment margins stood at 3.6%

n     WNA- II plant commenced operations in July. Increase in Nitric Acid capacity and commissioning of Ethyl Acetic and TDI plant to boost topline over the next 2 years

n     Reduce FY12E/FY13E estimates by 13.6% / 3.1% to Rs 19.3/Rs 25.7. Subsequently reduce price target by 13.6% to Rs 135, maintain BUY with 35% upside