Stocks to buy today: Shares of Chambal Fertilizers and Chemicals Ltd. are in base building mode since last seven to eight months. The chemical stock has fallen up to 10 per cent in last six months and is trading in the range of Rs. from 290 310 in the last one month. Prabhudas Lilladher believes that chemical and fertilizer stocks are all set to move out of this base building zone and could continue to move higher. Each level of 360 provides over 20 percent returns to its positional shareholders over the long term. Chambal Fertilizers share price today 295 each level on NSE.
Highlighting the fundamentals, which may attract interest from Dalal Street bulls, Prabhudas Lilladher says, “Chambal Fertilizers & Chemical Ltd grew overall fertilizer volumes 72% YoY to 1.39 mn mt (Urea and P&K sales registered solid growth in volumes of -2%/at. +72% YoY to 0.87/0.52mn mt respectively) and agrochemicals revenue up 184% YoY 1.9bn, resulting in overall revenue growth of 75% YoY 82.9 billion. Margins were impacted substantially (420bps YoY to 8.1%) due to a) higher cost inventory; b) Unfavorable foreign exchange and c) Inadequate subsidy in P&K fertilizers. EBITDA came to 6.7 billion, a 15% year-on-year increase.”
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The brokerage further said that the chemical company is expected to reverse 2.4bn of one-time provisions taken in 1HFY23 related to recognition of subsidy dues by the government, which is less than the NBS policy specified on the closing list of March’22. The company has also revised its TAN expansion plans in 1HFY23, with a total capital outlay of Rs16.45bn (11.7bn earlier) to build 0.24 mn mt (0.22 mn mt earlier) and to be commissioned over the next 34 months. hopefully.
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‘Revenue was in line with estimates, although margins were lower a) higher inventory costs; b) Unfavorable foreign exchange and c) Inadequate subsidy in Phosphatic (P&K) fertilizers. Going forward, we expect healthy subsidy disbursement from the government. To be continued (Subsidy Receipts of 9M’23 156.9 billion; 28.9bn in Jan’23) resulting in improved working capital and reduced interest burden,” the brokerage said.
On his suggestion to positional investors regarding Chambal Fertilizers shares, Prabhudas Lilladher said, “The delay of about a year in the Technical Ammonium Nitrate (TAN) project (likely to be commissioned in 1HFY26) and limited growth visibility in the existing business should be considered.” Given this, we reduce our target multiple from 10x to 9x (5 year high/low average 1 year ahead 15x/3x/7x). Maintain ‘Buy’ with Revised TP 360 based on 9XFY25 EPS (earlier Rs. 410 based on 10XFY25 EPS).
Disclaimer: The views and recommendations given above are those of individual analysts or broking companies and not of Mint. We advise investors to do due diligence with certified experts before making any investment decision.
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