Fertiliser - Trading Gains; Sector Update :: Edelweiss, report

Please Share::

�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��

��

-->

Overall fertiliser dispatch volumes (companies to distributors) grew 5.5% YoY in Q3FY15. While urea volumes grew steadily at 3.6% YoY, non-urea volumes jumped 7.9% YoY primarily owing to the 21.9% YoY spurt in traded non-urea volumes. Industry players, during our interactions, stated that manufacturing of DAP became unviable on account of surge in raw material prices (ammonia and phosphoric acid prices jumped 17% and 7% QoQ, respectively) during Q3FY15. However, ammonia price has corrected 10-12% in past 1 month. Further, MOP trading jumped significantly (up ~40% YoY), which we believe was on account of low base. We anticipate reversal of the downturn cycle in the non-urea fertiliser industry and players’ profitability to surge over the next 12-18 months owing to liquidation of excess channel inventories. For Q3FY15, we expect the spurt in trading volumes to drive revenue; EBITDA margins are likely to fall owing to higher proportion of traded volumes YoY for our coverage universe.

Higher trading drives non-urea fertiliser volumes

Overall fertiliser dispatch volumes (companies to distributors) rose 5.5% YoY during the quarter. Urea volumes grew steadily at 3.6% YoY, whereas non-urea volumes surged 7.9% YoY primarily owing to the 21.9% YoY spurt in traded non-urea volumes. DAP as well as MOP trading catapulted significantly during the quarter.

Uptick in raw material prices

Global average CFR prices of ammonia and phosphoric acid continued to remain high at USD640/MT and USD765/MT (up 17% and 7% QoQ), respectively. However, global FOB prices of urea and DAP corrected 12% and 7% QoQ to US320/MT and USD470/MT, respectively. Global potash prices were stable during the quarter. Ammonia prices have corrected by 10-12% in past one month.

LINK

https://www.edelweiss.in/research/Fertiliser--Trading-Gains;-Sector-Update/28036.html