Chambal Fertilisers (3QFY15) : Favourable risk-reward. Maintain BUY :: HDFC Securities

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Sizzling stocks - Idea Cellular; Chambal Fertilisers and Chemicals ::Business Line

 Idea Cellular (Rs 85.7)

After consistently knocking at its significant resistance at Rs 100 between August 2011 and April 2012, the stock of Idea Cellular witnessed a sharp fall in late April. However, the stock found support at Rs 73 in late May and again in late June this year.

The stock’s long-term uptrend line also provided support around Rs 73. Thereafter, the stock changed direction, triggered by positive divergence in the daily moving average convergence divergence indicator. It jumped 12.8 per cent with good volumes last week.

Result Update: Kajaria Ceramics, HCL Technologies, Chambal Fertilisers & TCS :: Emkay

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Result Update

Kajaria Ceramics Reco: BUY CMP: Rs 109 Target Price: Rs 143 Topline growth continues; re-iterate BUY ·      Q3 FY12 results were in line with our est. Revenues grew by 38% yoy to Rs 3.5bn while EBITDA grew by 41% yoy to ·      Rs 561mn. Company reported PAT of Rs 211mn, 20% yoy ·      Despite intensifying cost pressures in the form of increase in gas & other input costs, rupee depreciation, Kajaria has been able to improve margins 40bps yoy/80bps qoq to 16.0% ·      Management expects to clock 25% topline growth over the next 2 years and has set target of Rs 20bn by FY14.  EBITDA margins are likely to remain around 15-16% ·      We expect inorganic growth to remain the thrust area for management supported by healthy balance sheet. Reiterate BUY keeping FY12E / FY13E est of Rs 11.1/14.3 intact HCL Technologies Reco: HOLD CMP: Rs 425 Target Price: Rs 430 Decent show, retain HOLD ·      HCLT reported in line op performance with revenues at US$ 1,022 mn (+2% QoQ, +3.7% in c.c terms) and margins improving by ~140 bps QoQ to 18.1% aided by weak currency  ·      Core IT Svcs see a 3.8% QoQ (+5% vol) growth while IMS saw an unexpected 3% seq decline. Op metrics performance decent with US/Europe growing by 7.4%/2.7% QoQ     ·      BFSI, Manufacturing grow by 2.8/3.7% QoQ. Co announces 18 deal wins with a TCV of US$ 1 bn+. Cash generation improves with CFO’s at US$ 132 mn (70% of op profits) ·      Tweak FY12/13E EPS marginally lower by 0.8%/0.5% to Rs 34/38.5 as we cut our US$ revenue estimates modestly. Retain HOLD with an unchanged TP of Rs 430 Chambal Fertilisers Reco: ACCUMULATE CMP: Rs 79 Target Price: Rs 98 Operating results – better than estimates ·      Results were above est with APAT of Rs 862mn (adjusted for deferred tax liability in shipping of Rs 929mn) -5% yoy, sales Rs 18 bn, +32% yoy. Reported PAT stood at loss of Rs 12mn ·      Shift from tonnage tax in shipping to normal tax regime to reduce tax rates under weak environment resulted in deferred tax liability of Rs 929mn in Q3FY12 ·      All segment results were encouraging while trading margins at 6% (EBIT Rs 482mn) was positive surprise. Lower losses in textile and shipping too contributed to higher profit ·      Change in tax policies may reduce effective tax rates by 4-5% depending on shipping business performance. Maintain FY12/FY13 est at Rs 9.0 / 8.9 and reiterate Accumulate Tata Consultancy Services Reco: HOLD CMP: Rs 1,105 Target Price: Rs 1,075 Op performance fails to enthuse, retain HOLD ·      Dec’11 results tad misses est with rev at US$ 2.6 bn (+2.4% QoQ, +4.5% in c.c terms), Mgns up by ~190 bps QoQ(V/s est +240 bps). Inline profits aided by lower forex losses/ taxes ·      Op metrics weak with vol growth at 3.2% ( Infy +3.1% QoQ). Top 5/10 clients flat sequentially while top client rev grow by ~2.3% QoQ. Headcount addition strong at ~12k during the qtr ·      We cut our rev est.( model in 14.2%/16% YoY US$ growth V/s 16/17% earlier) driving a 3.4/4.2% cut in our FY13/14E earnings to Rs 63.2/71 (V/s Rs 65.4/74 earlier)  ·      Dec’11 qtr marks the 2nd qtr of op performance convergence with Infy. We see risks to TCS’s premium valuation multiples. HOLD with TP cut to Rs 1,075 (V/s Rs 1,110 earlier)

CHAMBAL FERTILISERS Core business steady; exceptionals dent profit :: Edelweiss

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Chambal Fertilisers’ (Chambal) Q3FY12 adj. PAT at INR865mn surpassed
our estimate owing to the lower‐than‐expected tax on account of change
in the shipping division’s taxation policy. While performance of urea and
traded goods was steady, shipping and textiles drag profitability. Reported
PAT was hit by exceptional deferred tax liability owing to change in
shipping division’s taxation policy from FY12. We maintain ‘HOLD’.
Fertiliser business steady; textiles and shipping drag
Chambal’s Q3FY12 standalone revenue grew 32.2% YoY (ahead of estimate) despite
urea sales declining 2.9%, owing to strong growth in traded goods revenue. EBITDA
margin declined 420bps YoY to 11.4% (lower than estimate) owing to product mix
skewed towards lower margin traded products vis‐à‐vis higher margin manufactured
products, coupled with losses in shipping and textiles. While the company reported loss
of INR12mn, adjusting for the exceptional deferred tax liability of INR929mn, MTM gain
of INR11.6mn on USD interest rate swap transactions and tax credit gain related to
earlier years of INR43.6mn, Chambal’s adjusted PAT dipped 9% YoY to INR865mn.
Shipping division opts out of tonnage tax scheme
Owing to losses posted by and weak outlook for the shipping division, Chambal has
opted out of the tonnage tax scheme and moved to normal taxation scheme for the
division, so as to lower tax outflow. Ergo, it had to account for the difference in the
written down value of the shipping division’s fixed assets, leading to an exceptional
deferred tax liability of INR929mn and a similar quantum is likely to be provided for in
Q4FY12. While the company will have to continue with normal taxation for shipping
business for the next 10 years, we believe Chambal will demerge the shipping entity
when the outlook improves and move back to tonnage tax for the new demerged entity.
Outlook and valuations: Non‐core biz drags; maintain ‘HOLD’
The urea pricing policy as well as new investment policy for urea continues to be
debated by the government and the uncertainty in these policies is likely to be an
overhang on the stock. While the benefit of import price parity (IPP) linked pricing for
urea production over the revamp cut off quantity is likely to flow in for Chambal during
Q4FY12, losses from the shipping division, textiles and the software subsidiary are likely
to offset these gains on consolidated basis. We maintain our estimates for the company
and our DCF based fair value at INR84/share. Currently, the stock is available at 12.3x
and 11.2x consolidated P/E of FY12E and FY13E, respectively. We maintain ‘HOLD’.

Chambal Fertilisers: Urea business to remain buoyant:: Emkay

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¾ Moderation in rural growth & shrinking farm profitability is
unlikely to impact domestic urea players. Any decline in urea
consumption will reduce urea imports
¾ Chambal is likely to benefit from incremental production
above cutoff which qualifies for IPP linked subsidy. Rupee
depreciation would further augment earnings
¾ However, unrelated diversification in shipping, textiles & IT is
a drag to profitability. We have modeled for losses in shipping
& textiles in FY12; IT business poses risk to earnings
¾ Chambal has traded in the PE band of 6-17x with an average
of 9.5x. Valuations remain comfortable at 8.5x fwd estimates.
Maintain Accumulate with target of Rs 98
Urea players unlikely to be hit in the current scenario; rupee depreciation
to benefit IPP linked production
Chambal Fertilisers is one of the leading players in the domestic urea space comprising
of 1.85mn mt of installed capacity with 8% domestic market share (by capacity). As
discussed above in the report any moderation in demand growth is unlikely to have any
impact on domestic urea production hence keeping the company’s earnings intact.
Chambal being a proxy to urea players, since 80% of profits is contributed by urea, is
likely to witness stable earnings. On the contrary it may surprise on positive side due to
benefit from rupee depreciation having favourable impact on IPP linked production.
However, unrelated diversification in shipping, textiles & IT is a drag
Chambal’s unrelated diversification in shipping, textiles & IT business is a drag to the
company’s profitability and has always weighed on investors’ sentiments. Out of
Chambal’s six vessels, only 1 vessel is currently under long term contract while the
remaining 5 ships are operating on spot rates. Textiles business is also under pressure
due to decline in cotton prices resulting into inventory losses. We believe shipping &
textiles are likely to remain laggard in the current scenario and have modeled for losses
in both these segments for FY12. IT business is also likely to post losses in FY12
creating further pressure on bottomline.
Valuations remain comfortable; Earnings might surprise in Q4 due to
higher IPP linked production;
Historically, Chambal Fertilisers has traded in the PE band of 6x-17x with an average of
9.5x during FY06-11 based on 1 year forward earnings estimates. Valuations remain
comfortable in the current scenario with the stock quoting at 8.5x currently. Earnings are
likely to surprise in Q4 due to higher IPP linked production coupled with incremental
gain from rupee depreciation. Further, any positive news flow related to implementation
of NBS in urea is likely to be a positive trigger. However continued pressure on
company’s other businesses (textiles, shipping and IT) and huge debt Rs 25bn on
balance sheet leading to M-t-M loss are key concerns. We maintain our Accumulate
rating on the stock with price target of Rs 98.

Chambal Fertiliser : Theme -Winter Picks :: Anand Rathi

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Chambal Fertiliser Target 101
Chambal Fertilisers and Chemicals Limited is a fertiliser producer. It is the manufacturer of Urea in private sector in India
and is also into the trading of fertilisers and other agri inputs. The Company also manufactures Synthetic and Cotton Yarn.
It operates in four segments: Own Manufactured Fertilizers, Trading, Textile and Shipping.
During the quarter, the Empowered Group of Ministers (EGoM) approved partial decontrol of urea, bringing it under
Nutrient Based Subsidy (NBS) policy. The proposal however, is yet to be approved by CCEA. We believe decontrol of urea
would be beneficial for efficient players and lead to improvement in profitability as well as return ratios.
The board of directors of Chambal has granted approval for setting up Single Super Phosphate (SSP) Plant at Dahej,
District Bharuch, Gujarat, with an annual capacity of 5 Lac MT, at a project cost of approximately Rs. 1.22 bn. The
Company is also setting up a SSP Plant at its existing factory premises at Gadepan, Distt. Kota, Rajasthan with an annual
capacity of 2,00,000 MT at a project cost of approximately Rs. 325mn.

Chambal Fertilisers Withdrawal of shipping business demerger - Negative :Emkay,

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Chambal Fertilisers

Withdrawal of shipping business demerger - Negative

ACCUMULATE

CMP: Rs87                                        Target Price: Rs98

---

n     Chambal’s Q2FY12 results were broadly in line with APAT of 841 mn, (-14%yoy) despite disappointment in shipping (EBIT loss of Rs 49 mn) and textiles (loss of Rs 90 mn)

n     Manufactured fertiliser and trading business posted encouraging results with EBIT margins of 16.8% and 6% respectively and expected to remain robust 

n     Withdrawal of proposed demerger of shipping is the biggest disappointment and is expected to put pressure on company’s earnings due to adverse business environment

n     Revise est to Rs 9.0/8.9 (from Rs 8.7/9.2) for FY12/FY13 resp. Trim target multiple and reduce target price to Rs 98 (from Rs 110) with downgrade to Accumulate (from BUY)

Chambal Fertilizers & Chemicals - Robust top line, poor bottom line :: ESIB Research

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Chambal Fertilizers & Chemicals
Robust top line, poor bottom line
Chambal posted disappointing 2QFY12 results, with revenue growing
7% YoY, but EBITDA contracting 9% YoY due to 1) expiration of
shipping contracts, 2) inventory write-off due to fall in cotton, leading
to both the shipping and textile segments generating losses. Chambal
has scrapped its plan to de-merge the shipping division due to
unfavourable negotiations and covenants put forward by European
banks. We trim our FY12 and FY13 estimates by 12% and 7% and reduce
our Fair Value to Rs. 82, maintaining our NEUTRAL stance.
Robust top line
Chambal delivered weak Q2FY12 earnings despite revenues growing by 6% YoY
to Rs. 16,383m (ESIB estimate Rs. 16,200m). Urea revenue grew by 14% YoY in
spite of a drop in urea volumes to the tune of 6%, on the back of per ton
realization on urea rising by 21% due to higher gas prices. Whilst the volume of
traded products was down 25% YoY, higher realizations of complex fertilizers
led to only a marginal decline of 4% in revenues from trading. Shipping and
Textile revenues grew by 38% and 13% YoY respectively.
Poor bottom line
In contrast to revenue performance, there was a 9% YoY decline in EBITDA as
Shipping and Textile fell into the red. The textile division posted an EBIT margin
of -9.9% as compared with a 10.7% margin in the same period last year.
Meanwhile with the expiration of its long-term shipping contracts in Q1FY12,
Chambal now deploys its ships at c.20% lower spot rates, leading to the
adjusted EBIT margin from shipping falling to -5% as compared with 6% during
the same period last year. Adjusting for tax credits, profit after taxes contracted
by 25% YoY to Rs. 738m in 2QFY12.
Shipping de-merger shelved
Chambal also announced it is shelving the plan to de-merge its shipping division
(de-merger plan announced in July ’11). The rationale management gave us was
1) unfavourable covenants levied by the lenders, 2) worsening credit conditions
in Europe and 3) a slowdown in the global shipping industry. Management was
at pains to stress it would still increase focus on the core business, and the
demerger had been deferred not cancelled. But the shipping de-merger is
important as Chambal’s balance sheet is stretched (gearing 1.6x) because of
high capital intensity of the shipping division, and it does not leave much room
for the company to raise future debt to fund any expansion plans. And as we’ve
seen again this quarter, investors remain exposed to losses in a non-core
shipping business eroding profitability coming from the core business.
Chambal’s growing attraction was as an increasingly pure fertilizer play at a time
the industry de-regulated, but that investment case has been impaired.
Trim estimates, revise price target
Given the weak outlook for shipping and textiles, we trim our earnings estimates
for FY12 and FY13 by 12% and 7% respectively. We have modelled shipping and
textiles segment to be in the red for FY12E as well as FY13E and to break even
only in FY14E, while IT division is in profit in FY13E. We expect the margin in
manufactured fertilizers to increase by +200 bps in FY12E on the back of higher
IPP linked realisations. Furthermore, the increasing price of phosphoric acid
leads us to build in margin expansion in the IMACID division. We have also
factored in that the new SSP plant with capacity of 200K tones will be functional
in 1Q FY13 and will work at 60% capacity in FY13. Chambal currently trades at
13x our FY12 earnings estimates. Our DCF analysis suggests a Fair Value of Rs.
82 (previous FV Rs. 91) implying a 6% downside. We reiterate our NEUTRAL
stance on the stock.


Risk to our fair value
Improvement in shipping and textiles division performance will lead to upward
revision in our estimates. Also, de-regulation of urea, which we have not factored
in, could lead to increase in our fair value.

Chambal Fertilisers & Chemicals Ltd - Rising on urea price escalation :: Unicon

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Chambal Fertilisers & Chemicals Ltd -  Rising on urea price escalation and talks of decontrol

• Chambal Fertilisers & Chemicals Ltd (CHMB) posted Q1 FY12 results inline with Unicon estimates. Total Income grew by 21.3% YoY to INR 11,839mn in the quarter.
• EBITDA remained flat around INR 1.7bn while EBITDA margin contracted by 300bps to 14.6%YoY.
• Net profit also remained flat around INR 640mn while net profit margin shrunk by 118bps to 5.4% YoY.

Outlook and Valuations

CHMB would benefit from growing urea demand on the back of healthy monsoon in 2011, rising urea prices (currently USD 550 per tonne), demerger of shipping business and talks of urea decontrol. Change in Urea investment policy provides further opportunity for capacity expansion. Stock is trading at 10.7x its FY13E earnings. We recommend ACCUMULATE with a price target of INR 113.

Thanks & Regards

Unicon Wealth Research

KIFS Result update of Chambal-Wipro-Dr Reddy-Petronet-IRB-Dish TV

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CHAMBAL FERTILISERS

OVERVIEW

Chambal Fertilizers & Chemicals is part of KK Birla Group .It has three divisions catering agri products, shipping & textiles. Company’s Ammonia Plant has a capacity to produce 1,350 MT per day and the Urea Plant has a production capacity of 2,350 MT per day. Its brand ‘Uttam Veer’ has distribution network of 1500 dealers & 20,000 village level outlets spanning ten states. It has two modern soil & water testing laboratories. The company also has interest area in business of shipping under India Steamship Company , a wholly owned subsidiary.

Key highlights:

· Total income  grew by 21% Y-o-Y to Rs. 1164 cr v/s Rs. 961 cr in Jun-10

· Operating Profit grew by 3% Y-o-Y to Rs. 190 cr  v/s Rs. 185 cr in June-10

· OPM fell by 292 bps Y-o-Y to 16.31%  v/s 19.23% in June-10

· Net profit remained unchanged Y-o-Y to Rs. 64 cr. for the Quarter

· NPM fell by 119 bps Y-o-Y to 5.47%  v/s 6.66% in June-10

WIPRO

OVERVIEW

Wipro is a leader in providing IT solutions and services for the corporate segment in India offering system integration, network integration, software solutions and IT services. Wipro also has profitable presence in niche market segments of consumer products and lighting. In the Asia Pacific and Middle East markets, Wipro provides IT solutions and services for global corporations. Wipro Consumer Care and Lighting, a business unit of Wipro Limited, has a profitable presence in the branded retail market of toilet soaps, hair care soaps and baby care products.

Key highlights:

· Total income  grew by 22% Y-o-Y to Rs. 7311 cr. v/s Rs. 5982 cr in June-10

· Operating Profit grew by 15% Y-o-Y to Rs. 1751 cr.  v/s Rs. 1520 cr in June-10

· OPM fell by 145 bps Y-o-Y to 23.95%  v/s 25.4% in June-10

· Net profit grew by 10% Y-o-Y to Rs. 1219 cr.  v/s Rs. 1110 cr in June-10

· NPM grew by 125 bps Y-o-Y to 12.43%  v/s 11.18% in June-10

· Depreciation grew 28% Y-o-Y to Rs. 174 cr.  v/s Rs. 136 cr in June-10

DR REDDY’S LAB

OVERVIEW

Dr. Reddy’s Laboratories Ltd. (DRL) is an integrated global pharmaceutical company having geographically focus on India, USA, Russia & CIS and other emerging markets of the world. The company has three business divisions – Pharmaceutical Services & Active Ingredients, Global Generics and Proprietary Products. DRL has therapeutic focus on gastro-intestinal, cardiovascular, dialectology, pain management, pediatrics , etc.

Key highlights:

· Total income  grew by 18% Y-o-Y to Rs. 1978 cr. v/s Rs. 1673 cr in June-10

· Operating Profit grew by 12% Y-o-Y to Rs. 402 cr.  v/s Rs. 360 cr in June-10

· OPM fell by 106 bps Y-o-Y to 20.34%  v/s 21.4% in June-10

· Net profit grew by 25% Y-o-Y to Rs. 262 cr.  v/s Rs. 209 cr in June-10

· NPM grew by 84 bps Y-o-Y to 13.26%  v/s 12.42% in June-10

DISH TV

OVERVIEW

Dish TV’s Revenue model is based on subscription revenues which are collected in advance as against credit being availed from business creditors. The company currently has a 32% market share of the 6 player private DTH industry in India. The Indian DTH industry has seen phenomenal growth, currently encompassing close to 35 Million subscribers. In a very short span of time of 5 years, the DTH sector has already acquired 25% of the cable and satellite household and is expected to reach 50% in the next 3 years.

Key highlights:

· Total income grew by 51% Y-o-Y to Rs.460 cr. v/s Rs.304 cr in June-10

· Operating Profit grew by 222% Y-o-Y to Rs.126 cr. v/s Rs.39 cr in June-10

· OPM grew by 1450 bps Y-o-Y to 27.33%  v/s 12.83% in June-10

· Net loss fell by 71% Y-o-Y to Rs. 18 cr. v/s Rs. 63 cr in June-10

· NPM grew by 1678 bps Y-o-Y to -3.98%  v/s -20.76% in June-10

· Interest Cost increased sharply by 150% Y-o-Y

PETRONET LNG

OVERVIEW

Petronet LNG Ltd. (PLL) is India’s first LNG terminal company, promoted by GAIL, ONGC, IOC and BPCL. The company has its re-gasification plant on the west coast at Dahej. The company imports natural gases in liquefied form by sell and purchase agreement (SPA) from Qatar and re-gasifies to distribute to its promoters on take or pay contract basis. PLL is on final stage to launch its new re-gasification plant at Kochi. The company is also looking to setup LNG terminal on the East coast. 

 Key highlights:

· Total income  grew by 83% Y-o-Y to Rs. 4623 cr. v/s Rs. 2526 cr in June-10

· Operating Profit grew by 78% Y-o-Y to Rs. 464 cr.  v/s Rs. 260 cr in June-10

· OPM fell by 27 bps Y-o-Y to 10.04%  v/s 10.31% in June-10

· Net profit grew by 131% Y-o-Y to Rs. 257 cr.  v/s Rs. 111 cr in June-10

· NPM grew by 114 bps Y-o-Y to 5.55%  v/s 4.41 % in June-10

IRB INFRASTRUCTURE

OVERVIEW

IRB Infrastructure Developers Ltd. was incorporated to fund the capital requirements of the IRB Group initiatives in the infrastructure sector. The revenue of the company may be impacted in the result due to mark to market provisioning for interest rate currency swap for Mumbai—Pune Express highway. The management of the company expected to bag another contract same as Ahmedabad - Vadodara Express highway in FY12. Tolling on Tumkur - Chitradurg project has commenced from Jun, 2011 and company is collecting toll of nearly Rs 42 lakh per day as against its estimate of Rs 44 - 45 lakh per day.

Key highlights:

· Total income  grew by 17.5% Q-o-Q to Rs. 179 cr. v/s Rs. 152 cr in June-10

· Operating Profit fell by 53% Q-o-Q to Rs. 44 cr.  v/s Rs. 94 cr in June-10

· OPM ( Excl OI) fell by 371 bps Q-o-Q to 12.7%  v/s 16.4% in June-10

· Net profit fell by 75% Q-o-Q to Rs. 18 cr.  v/s Rs. 72 cr in June-10

· NPM fell by 3715 bps Q-o-Q to 9.97%  v/s 47.1% in June-10

· Interest grew 23% Q-o-Q to Rs. 18 cr.  v/s Rs. 14.6 cr in June-10

Chambal Fertilisers Results below estimates- ACCUMULATE ::Emkay

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Chambal Fertilisers

Results below estimates

ACCUMULATE

CMP: Rs 81                                       Target Price: Rs 86

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n     Q4FY11 results were below our estimates - Revenues grew  by 13% yoy to Rs 8.1 bn, EBITDA declined by 31% yoy to Rs 1.15 bn

n     Fertilizer segment disappointed with EBIT margins of 9% vs 17% last year. However, shipping margins improved to 20% as compared to 11.6% last year

n     EBITDA margin decreased to 14% of sales in Q4 as compared to 23% last year. However, margins to improve in FY12E because of lower trading

n     Maintain FY12E estimates & price target of Rs 86, based on 10x FY12E EPS (as against 15x to complex fertiliser players), maintain ACCUMULATE

Chambal Fertilisers: RECO : ACCUMULATE TP : Rs 86 ; Emkay Top Recommendations

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Chambal Fertilisers: RECO : ACCUMULATE TP : Rs 86
Investment Rationale
§ Chambal Fertilisers is one of the leading urea players in India, constituting 10% of the domestic urea capacity.
Chambal is proxy play on urea since it contributes ~ 80% to its profits
§ Chambal is one of the biggest beneficiaries of the change in Urea policy where subsidy on company's additional
urea production of ~140 thousand mt will be linked with International Price Party (IPP) with a floor and ceiling of
US$ 250 - 425/ mt. It expected to contribute ~15% to company’s profit in FY11
§ Expected policy changes in urea like urea decontrol and bringing it under Nutrient Based Scheme (NBS) is
positive for Chambal due to its energy efficiency, strong distribution network and access to feedstock. Under
NBS, company should benefit from the low production cost due energy efficiency
§ It has further plans to increase its capacity through debottlenecking / brownfield which will benefit from current
IPP linked subsidy. In recent budget, fertiliser companies have been given infrastructure status which is likely to
result in lower tax rates for new projects however additional gas allocation for new projects is key concern
Valuations
§ We expect revenue to grow at a CAGR (FY10-12E) of 7.5% and PAT at 14.5% with FY11E/FY12E EPS of Rs
8.5 / Rs 8.6. RoIC to improve from 12% in FY10 to 16% by FY12E. At current valuations of 8x and dividend yield
of ~3%, the stock looks attractive. Demerger of its shipping business and policy announcements are near term
catalysts for the company

CHAMBAL FERTILISERS & CHEMICALS- Trading gains drive profitability: Edelweiss

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CHAMBAL FERTILISERS AND CHEMICALS
Trading gains drive profitability


􀂄 Strong profit growth on account of high trading margin
Chambal Fertilisers and Chemicals (Chambal) posted standalone revenue growth
of 18.6% at INR 13,588 mn and EBIDTA growth of 21.4% Y-o-Y in Q3FY11.
EBITDA margin has expanded ~40 bps Y-o-Y to 16.9% in Q3FY11. Net profit
came at INR 1,074 mn, up 34.7% Y-o-Y. Strong growth in revenue and profit was
on account of robust trading gains, coupled with reversal of net mark-to-market
loss provision of INR 170.7 mn in the shipping division, and reversal of provision
of INR 5.2 mn in fertilisers on USD interest rate swap transactions. Adjusting for
these, adjusted profit for Q3FY11 is at INR 898 mn.

Chambal Fertilisers Upgrade in target price to Rs 86; Emkay research

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Chambal Fertilisers

Upgrade in target price

ACCUMULATE

CMP: Rs 78                                       Target Price: Rs 86

---

n     Q3FY11 results were in line with estimates with APAT of Rs 903 mn (adjusted for Rs 171 mn EO item), +13% yoy

n     Shipping business disappoints with EBIT margins of 9% vs 37% due to softening charter rates and lower asset utilization. Fertiliser trading margins remain healthy at 6.6%

n     EBITDA margins contraction of 80 bps to 15.7% (vs estimated 18.9%) is on account of higher fertiliser trading and disappointing results of shipping business

n     Upgrade price target to Rs 86, based on 10x FY12 eps (as against 15x to complex fertiliser players), maintain ACCUMULATE

Chambal Fertiliser -Results in line with estimates: Alchemy

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Results in line with estimates
Higher trading leads to strong top line growth
 During 2QFY11, Chambal Fertiliser has reported good set of numbers. Steep rise in
trading revenues of fertilisers (`7.1bn compared to 1.38bn in 2QFY10) led to 60%
YoY growth in revenue to `15.4bn.
 Urea volumes during the quarter grew 3% YoY to ~595,000 tonnes. Textile
revenues during the quarter increased 19% YoY, while shipping division continued
to suffer from low day rates leading to 13% YoY de-growth in revenues