Fertiliser Sector Update Volumes decline but margins are protected n Emkay

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Fertiliser Sector Update

Volumes decline but margins are protected

n     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)

n     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

n     Despite increase in raw material prices, companies’ ability to pass on input cost to farmers to help protect margins

n     We reiterate BUY on Coromandel and GSFC and see current weakness in the stocks as a buying opportunity

Company	Reco	CMP	TP
Chambal	Buy	99	110
Coromandel	Buy	300	435
Deepak	Buy	159	250
GNFC	Buy	90	135
GSFC	Buy	440	530
Tata Chem	Accum	324	400
Nagarjuna	NR	24	NA

Source: Capitaline, Emkay Research