Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Deepak Fertilisers’ (DFPCL) Q4FY12 PAT, at INR455mn, came in below our
expectation owing to lower-than-estimated EBITDA margin. While
fertiliser segment continued its strong performance, margin pressures
were prevalent in the chemicals segment owing to high raw material
prices. Factoring in the latter, we have lowered our FY13E EPS 7%. Also,
the uncertainty on government’s proposal for profit sharing on gas
supplied to non-urea manufacturers like DFPCL is likely to be an overhang
on the stock for some time. However, owing to attractive valuations, we
maintain ‘BUY’ with a revised target price of INR198. DFPCL announced
INR4.2bn capex in fertilisers to be executed over the next 30 months.
Lower-than-expected EBITDA margin impacts profitability
Despite a strong standalone revenue growth of 61% in Q4FY12, PAT came below
expectation at INR455mn (down 8% YoY) owing to poor EBITDA margin at 13.1% (down
800bps YoY and 350bps QoQ). The negative surprise in EBITDA margin was on account of
pressure on chemicals margin, owing to high propylene prices coupled with incremental
replacement of manufactured ammonia with imported ammonia due to a 20-day
planned shutdown of the ammonia plant during Q4FY12. While chemicals margins are
better currently, they are likely to be lower than earlier quarters going ahead.
Key highlights
• Two fertiliser projects announced: INR3.6bn brownfield NPK expansion to more
than double current capacity and INR0.6bn greenfield Bentonite sulphur plant. To
be executed over next 30 months.
• Management continues to guide TAN sales volume of 0.3mn MT in FY13.
• Announced dividend of INR5.5/share (dividend yield 4.2%) vis-à-vis INR5.0/share in
FY11.
Outlook and valuations: Attractive; maintain ‘BUY’
On account of the persistent pressure on the chemicals segment margin, we have
factored in lower EBITDA margin of 18.4% in FY13 vis-à-vis earlier estimate of 20.8% and
lowered our EPS estimate to INR27.8/share. Currently, the stock is available at 4.8x and
4.2x consolidated P/E for FY13E and FY14E, respectively. Owing to attractive valuations,
we maintain our ‘BUY’ recommendation, with a revised target price of INR198 per share
(INR220 earlier) based on 4.5x FY13E EV/EBIDTA.
Other highlights
• Announced significant capex plans in fertiliser segment:
A) Brownfield capacity expansion of complex fertilisers from the current 229,000
MT/yr to 600,000 MT/yr, at an estimated cost of INR3,600mn (this expansion will
facilitate manufacturing multiple grades of NPK fertilisers vis-à-vis only Ammonium
Nito Phosphate (24:24:0) currently) (IRR expected to be ~17%).
B) Greenfield Bentonite Sulphur of 32,000 MT/yr capacity at Panipat, at an estimated
cost of INR550mn (IRR expected to be ~20%).
• Management guides for a timeline of 30 months to complete these two projects and
intends to take up a D/E of 2x for the two projects. Despite having ample cash flow
generation, which can be used to fund these projects, DFPCL intends to use debt as well
because DFPCL is evaluating some capex in chemicals as well, for which it may need the
cash.
• Accounts receivable were at INR5,619mn as on March 31, 2012, vis-à-vis INR2,596mn
YoY. Management guided that this high level of receivables at FY12 end is on account
of ~INR2,200mn subsidy receivable from the government (which was at INR600mn at
FY11 end) and this has been on account of the government running out of budgetary
allocation coupled with the delay in the 2012-13 budget. The accounts receivable are
expected to return to normal by QFY12 end, with the government likely to pay off most
of the pending subsidy payments.
• Ishanya continues to post losses at the PBIT level. Management stated that restructuring
of the mall is likely to be finished by Q2FY13 end or early Q3FY13 and it is
targeting occupancy of 70% by FY13 end. Currently, occupancy is ~30%.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Deepak Fertilisers’ (DFPCL) Q4FY12 PAT, at INR455mn, came in below our
expectation owing to lower-than-estimated EBITDA margin. While
fertiliser segment continued its strong performance, margin pressures
were prevalent in the chemicals segment owing to high raw material
prices. Factoring in the latter, we have lowered our FY13E EPS 7%. Also,
the uncertainty on government’s proposal for profit sharing on gas
supplied to non-urea manufacturers like DFPCL is likely to be an overhang
on the stock for some time. However, owing to attractive valuations, we
maintain ‘BUY’ with a revised target price of INR198. DFPCL announced
INR4.2bn capex in fertilisers to be executed over the next 30 months.
Lower-than-expected EBITDA margin impacts profitability
Despite a strong standalone revenue growth of 61% in Q4FY12, PAT came below
expectation at INR455mn (down 8% YoY) owing to poor EBITDA margin at 13.1% (down
800bps YoY and 350bps QoQ). The negative surprise in EBITDA margin was on account of
pressure on chemicals margin, owing to high propylene prices coupled with incremental
replacement of manufactured ammonia with imported ammonia due to a 20-day
planned shutdown of the ammonia plant during Q4FY12. While chemicals margins are
better currently, they are likely to be lower than earlier quarters going ahead.
Key highlights
• Two fertiliser projects announced: INR3.6bn brownfield NPK expansion to more
than double current capacity and INR0.6bn greenfield Bentonite sulphur plant. To
be executed over next 30 months.
• Management continues to guide TAN sales volume of 0.3mn MT in FY13.
• Announced dividend of INR5.5/share (dividend yield 4.2%) vis-à-vis INR5.0/share in
FY11.
Outlook and valuations: Attractive; maintain ‘BUY’
On account of the persistent pressure on the chemicals segment margin, we have
factored in lower EBITDA margin of 18.4% in FY13 vis-à-vis earlier estimate of 20.8% and
lowered our EPS estimate to INR27.8/share. Currently, the stock is available at 4.8x and
4.2x consolidated P/E for FY13E and FY14E, respectively. Owing to attractive valuations,
we maintain our ‘BUY’ recommendation, with a revised target price of INR198 per share
(INR220 earlier) based on 4.5x FY13E EV/EBIDTA.
Other highlights
• Announced significant capex plans in fertiliser segment:
A) Brownfield capacity expansion of complex fertilisers from the current 229,000
MT/yr to 600,000 MT/yr, at an estimated cost of INR3,600mn (this expansion will
facilitate manufacturing multiple grades of NPK fertilisers vis-à-vis only Ammonium
Nito Phosphate (24:24:0) currently) (IRR expected to be ~17%).
B) Greenfield Bentonite Sulphur of 32,000 MT/yr capacity at Panipat, at an estimated
cost of INR550mn (IRR expected to be ~20%).
• Management guides for a timeline of 30 months to complete these two projects and
intends to take up a D/E of 2x for the two projects. Despite having ample cash flow
generation, which can be used to fund these projects, DFPCL intends to use debt as well
because DFPCL is evaluating some capex in chemicals as well, for which it may need the
cash.
• Accounts receivable were at INR5,619mn as on March 31, 2012, vis-à-vis INR2,596mn
YoY. Management guided that this high level of receivables at FY12 end is on account
of ~INR2,200mn subsidy receivable from the government (which was at INR600mn at
FY11 end) and this has been on account of the government running out of budgetary
allocation coupled with the delay in the 2012-13 budget. The accounts receivable are
expected to return to normal by QFY12 end, with the government likely to pay off most
of the pending subsidy payments.
• Ishanya continues to post losses at the PBIT level. Management stated that restructuring
of the mall is likely to be finished by Q2FY13 end or early Q3FY13 and it is
targeting occupancy of 70% by FY13 end. Currently, occupancy is ~30%.
No comments:
Post a Comment