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India Equity Research Reports, IPO and Stock News
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¾ Decontrolled fertiliser volumes declined by 18% yoy (Apr-
Aug’11) due to lower imports of MOP (down by 58% yoy) and
DAP (down by 42% yoy)
¾ Manufactured fertiliser volumes up by 3% yoy due to farmers’
growing awareness and companies’ thrust on NPK sales (up
by 12% yoy) in light of limited raw material availability
¾ Despite increase in raw material prices, companies’ ability to
pass on input cost to farmers to help protect margins
¾ We reiterate BUY on Coromandel and GSFC and see current
weakness in the stocks as a buying opportunity
Decontrolled fertiliser volumes dropped by 18% yoy (Apr-Aug’11) owing
to lower trading
Decontrolled fertiliser (includes DAP/MOP/SSP and other NPK fertilisers) volumes
dropped by 18% yoy (Apr-Aug’2011) mainly due to sharp decline in traded fertiliser.
Lower availability of products in the global market hit traded fertiliser (DAP and MOP)
volumes, which declined by 47% yoy. As a result, contribution of imported DAP & MoP
to total decontrolled fertiliser volumes reduced to 26% as against 40% last year. The
deadlock between Indian potash importers and global suppliers of MoP over pricing of
imports for FY12 reduced MOP sales by 58% yoy while lower availability of DAP
resulted in lower imports of DAP by 42%.
Own manufactured fertiliser volumes increased by 3%, driven by higher
NPK sales while urea volumes gained by 11%
Though overall decontrolled fertiliser sales volumes were down by 18% yoy, own
manufactured decontrolled fertiliser (Indigenous DAP, SSP and other NPK fertilisers)
sales increased by 3% yoy, mainly driven by 12% yoy growth in NPK fertilisers. Urea
sales also increased by 11% yoy and accounted for 54% of total fertiliser sales against
46% previous year. We believe that the growth in NPK fertiliser is driven by growing
awareness among farmers and companies’ thrust on higher sales of NPK fertiliser on
account of better use of limited raw materials.
Companies’ margins are protected despite cost pressure
We believe that companies have been able to pass on the impact of rising input cost to
the farmers and hence, protect their margins. Driven by increase in prices of raw
materials like ammonia (up 55% yoy), rock phosphate (58%), sulphur (76%) and phos
acid (35%), companies have increased the end product prices to the farmers by 50-60%
to compensate for increase in input cost.
We reiterate BUY on Coromandel and GSFC
While we expect lower volumes to adversely impact revenues, however higher fertilizer
prices will help to offset the decline. We believe that companies’ ability to pass on the
input cost pressure to the farmers will help them protect their margins. We see the
recent correction in the stock prices of complex fertilisers players by 8-15% as a buying
opportunity and maintain our BUY recommendation on Coromandel and GSFC (most
dependent on complex fertiliser in our universe).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
¾ Decontrolled fertiliser volumes declined by 18% yoy (Apr-
Aug’11) due to lower imports of MOP (down by 58% yoy) and
DAP (down by 42% yoy)
¾ Manufactured fertiliser volumes up by 3% yoy due to farmers’
growing awareness and companies’ thrust on NPK sales (up
by 12% yoy) in light of limited raw material availability
¾ Despite increase in raw material prices, companies’ ability to
pass on input cost to farmers to help protect margins
¾ We reiterate BUY on Coromandel and GSFC and see current
weakness in the stocks as a buying opportunity
Decontrolled fertiliser volumes dropped by 18% yoy (Apr-Aug’11) owing
to lower trading
Decontrolled fertiliser (includes DAP/MOP/SSP and other NPK fertilisers) volumes
dropped by 18% yoy (Apr-Aug’2011) mainly due to sharp decline in traded fertiliser.
Lower availability of products in the global market hit traded fertiliser (DAP and MOP)
volumes, which declined by 47% yoy. As a result, contribution of imported DAP & MoP
to total decontrolled fertiliser volumes reduced to 26% as against 40% last year. The
deadlock between Indian potash importers and global suppliers of MoP over pricing of
imports for FY12 reduced MOP sales by 58% yoy while lower availability of DAP
resulted in lower imports of DAP by 42%.
Own manufactured fertiliser volumes increased by 3%, driven by higher
NPK sales while urea volumes gained by 11%
Though overall decontrolled fertiliser sales volumes were down by 18% yoy, own
manufactured decontrolled fertiliser (Indigenous DAP, SSP and other NPK fertilisers)
sales increased by 3% yoy, mainly driven by 12% yoy growth in NPK fertilisers. Urea
sales also increased by 11% yoy and accounted for 54% of total fertiliser sales against
46% previous year. We believe that the growth in NPK fertiliser is driven by growing
awareness among farmers and companies’ thrust on higher sales of NPK fertiliser on
account of better use of limited raw materials.
Companies’ margins are protected despite cost pressure
We believe that companies have been able to pass on the impact of rising input cost to
the farmers and hence, protect their margins. Driven by increase in prices of raw
materials like ammonia (up 55% yoy), rock phosphate (58%), sulphur (76%) and phos
acid (35%), companies have increased the end product prices to the farmers by 50-60%
to compensate for increase in input cost.
We reiterate BUY on Coromandel and GSFC
While we expect lower volumes to adversely impact revenues, however higher fertilizer
prices will help to offset the decline. We believe that companies’ ability to pass on the
input cost pressure to the farmers will help them protect their margins. We see the
recent correction in the stock prices of complex fertilisers players by 8-15% as a buying
opportunity and maintain our BUY recommendation on Coromandel and GSFC (most
dependent on complex fertiliser in our universe).
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