Agriculture is the primary source of livelihood for about 58% of India’s population.
It is that time of the year when people wait with bated breath for the Union Budget. The entire country has great expectations from the upcoming Union Budget 2022.
The fate of many industries will be discussed in the upcoming budget to be held on February 1, 2022.
Today, we would like to focus on one of the most important sectors of the Indian economy – the fertilizer sector.
According to a Bloomberg report, the Indian government plans to allocate about $19 billion in its federal budget to compensate fertilizer companies that sell their products to farmers at below market prices.
After the withdrawal of three agriculture law bills last year, five states, including Uttar Pradesh, are due to go to polls early this year. The move is believed to pacify the farmers.
The increase in fertilizer subsidies may help fertilizer businesses offset the losses incurred last year due to higher cost of inputs. The increase in subsidy will also help the farmers to cope with the hike in the prices of chemical firms to reduce the input cost.
Agriculture is the primary source of livelihood for about 58% of India’s population. Based on this India’s fertilizer sector is incredibly essential. It produces some of the most important raw materials for agricultural production.
India’s growing population Fertilizer is also one of the benefits for the business. This will increase the demand in future.
with the help of Equitymaster’s Powerful Stock ScreenerWell, we have narrowed down the best fertilizer firms in India for you to track.
These are the stocks that came up when we ran the screener for the top fertilizer companies in India.
1. Chambal Fertilizers and Chemicals
Chambal Fertilizers & Chemicals is a manufacturer of Urea and Di-Ammonium Phosphate (DAP).
It is the largest producer of urea in the private sector with an installed capacity of 1.5 million tonnes per annum (MTPA).
The company’s segments include fertilizers and other agricultural inputs, self-made phosphoric acid, textiles, shipping and others.
It was also engaged in software business. But in 2021, it sold assets and shifted some of the business’s liabilities to halt software operations.
The firm has a wide distribution network of 3,700 dealers and 50,000 retailers across the country. It has presence in Jammu and Kashmir, Haryana, Uttarakhand, Punjab, Uttar Pradesh, Bihar, West Bengal, Madhya Pradesh, Rajasthan and other states. It accounts for 90% of the total market size of fertilizers in India.
For the September 2022 quarter, Chambal Fertilizers’ net profit grew by 15.8% to Rs 5.1 billion as against Rs 4.4 billion during the same quarter last year.
The company will announce the December quarter results on January 28, 2022. It will also provide information related to dividend payment.
As of now, the stock price has risen 111% to Rs 477 as on 20 January 2022, from Rs 214 in the same month last year.
2. Coromandel International
Coromandel International is a part of the Murugappa Group. The group has presence in various industries like auto components, abrasives, financial services, transmission systems, cycles, sugar, agricultural inputs, fertilizers, plantation etc.
The company is one of the leading agriculture solution providers in India. It provides a diverse range of products and services across the agricultural value chain.
It specializes in fertilizers, crop proteins, bio-pesticides, special nutrients, organic fertilizers, etc. The company distributes its products through a network of 20,000 dealers and 2,000+ market development team.
It owns and operates 16 manufacturing facilities across India in Tamil Nadu, Karnataka, Andhra Pradesh, Maharashtra and other locations.
Shares of Coromandel International have underperformed, falling nearly 8% over the past year. Irregular monsoon has affected investor confidence.
However, due to the anticipated growth in the upcoming Rabi crop season, the company’s profitability prospects look bright.
The company performed well on the revenue front for the quarter ended September 30, 2022, registering a growth of 34% over the previous year.
3. Rama Phosphate
Rama Phosphate (RPL) is one of the leading Phosphatic Fertilizer manufacturers in India, i.e. Single Super Phosphate (SSP) Fertilizer manufacturing.
The company also produces Oleum, Nitrogen, Phosphorous and Potassium (NPK), De-oil cake and Soya oil.
These trademarked brands, ‘Suryaphool’ and ‘Girnar’ are well recognized in the farming community.
On the financial front, Rama Phosphates’ net profit grew 101.1% to Rs 227.2 million for the quarter ended September 2021, from Rs 113 million during the previous quarter in 2020. The company’s strong performance was on the back of higher operating revenues.
Over the last 5 years, the company has delivered decent profit growth of 39.3% Compound Annual Growth Rate (CAGR).
In addition, veteran investor Dolly Khanna has taken additional stake in this multibagger fertilizer stock, as per shareholding data for December 2021.
Dolly Khanna has bought around 0.4% stake in Rama Phosphate, taking the total stake in the company to around 2.3% or 4 lakh equity shares.
In the last one year, the fertilizer stock has given multibagger returns of 320 per cent, while it has gained 31 per cent in one month.
4. Dharmasi Morarji Chemical
Dharamsi Morarji Chemical Company is engaged in manufacturing of bulk chemicals and specialty chemicals used in industries like pharmaceuticals, detergents, dyes etc.
This smallcap company was one of the first producer of sulfuric acid and phosphate fertilizers in India.
It is a multi-product, multi-local company and has emerged as the largest producer of SSP as well as a major producer of heavy chemicals in India.
It has two manufacturing facilities located at Roha and Dahej.
The company is supported by many prominent customers, including Alkyl Amine, IPCA, Epcotex, Aurobindo, Dow, Deepak Nitrite, Pidilite etc.
The company reported strong growth in revenue in the September 2022 quarter as revenue grew 61% to Rs 725.3 million as against Rs 497.7 million in the same period last year. This growth has been on account of higher realizations and moderate growth in volumes.
However, earnings before interest, tax, depreciation and amortization (EBITDA) margin and profitability were impacted by sharp rise in raw material prices and freight cost.
Despite the challenging operating environment, the company posted a strong performance in the specialty chemicals segment. It is confident of passing the rising input cost on to the customers in this segment.
The outlook for specialty chemicals remains strong. The company is seeing strong demand from domestic and export customers.
The company has managed to double its investor wealth in the last one year. The share price has risen more than 100% during this period.
5. Deepak Fertilizers
Deepak Fertilizers & Petrochemicals (DFPCL) is an Indian manufacturer of industrial and agricultural chemicals, crop nutrients and fertilisers. It also owns real estate.
The company markets fertilizers under the brand name of ‘Mahadhan’ since 1990.
Deepak Fertilizers is one of the largest manufacturers of chemicals in India. This technology manufactures ammonium nitrate (mining chemical), industrial chemical and crop nutrition. These products are used in explosives, mining, infrastructure and health care.
Recently, SmartCam Technologies, a wholly owned subsidiary of Deepak Fertilizers, said Odisha Chief Minister Naveen Patnaik had laid the foundation stone of Rs 22 billion technical ammonium nitrate complex.
The complex, located at Gopalpur Industrial Park, will have an annual capacity of 377 kilo tonnes and is planned to be commissioned by August 2024.
Once completed, the project will help Odisha become a major supply source for technical ammonium nitrate, serving the entire eastern region, from where the majority of mining development is expected to come in the future.
This is a good sign for the company.
Deepak Fertilizers reported 16% growth in consolidated net profit at Rs 933.3 million for the second quarter ended September, mainly driven by higher earnings.
Net income in the second quarter rose to Rs 18 billion from Rs 14.2 billion in the year-ago period.
The share price of Deepak Fertilizers has given around 45.5% return to its shareholders in the last one month while Chemicals stock has given around 29% return in the last six months.
Whereas, it has given around 230% returns to its investors in the last one year.
Snapshot of Top Fertilizer Stocks in India from Equitymaster’s Stock Screener
Here’s a quick look at the above companies based on some key financial conditions.
Please note that these parameters are subject to change as per your selection criteria.
This will help you identify and eliminate stocks that are not meeting your requirements and emphasize stocks that are well within the metrics.
To finish
Considering the importance of agriculture, the fertilizer business is one business that the Indian economy cannot ignore.
The share of agriculture in gross domestic products (GDP) increased to 19.9% in 2020-21 from 17.8% in 2019-20. The last time this much contribution was in 2003-04.
Agribusiness is a life-sustaining industry and it offers excellent investment opportunities.
However, not all agricultural stocks are the same. Every business has its own concerns. When deciding which agricultural stocks are suitable, examine how these opportunities and risks fit in with your investment preferences.
Look for companies that are innovating. Think Agritech, which has immense untapped potential. Although at the initial stage, agritech is bound to change the way agribusiness is done.
To conclude, when it comes to investing, the stock you choose should be reliable. Investors should invest their money in a firm that has a proven track record of success.
If there is not enough confidence in the stock, it can make the initial investment weak and liquidate it before it rises.
Happy investment!
Disclaimer: This article is for informational purposes only. This is not a stock recommendation and should not be treated as such.
(This article is syndicated from) Equitymaster.com,
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
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