Gujarat State Fertilizer & Chemicals Ltd. share price target

GSFC has announced the annual shutdown of its Ammonia - IV (1,350MTD) plant at Vadodara unit for 50 days. Due to this, other connected plants Urea-II (800MTD), Caprolactam-I (20,000TPA), AS-II, and SA-II (469TPD) will also be affected. GSFC has made alternate arrangements to minimize the production losses of various fertilizers and industrial products. The company is also ensuring continuous supply of...

Management has indicated that the Fertiliser segment's profitability will revive in Q2FY19 on the back of successive price hikes taken in the last few months. However, higher Phos Acid prices (up 4% qoq; 26% yoy), coupled with INR depreciation will result in modest profit. However, INR depreciation will have a positive impact on the Chemical segment's profitability since most chemicals are linked to IPP. We cut our FY19/20E EPS estimates by 14%/5%. Our SOTP implies a TP of Rs136 (previously Rs150). Maintain BUY....

GSFC reported ~39% YoY growth in net sales in Q3FY18 to INR 15375mn on account of strong growth (~49% YoY) in fertilizer segment. Capro-Benzene spread at $1000/ton in February would help EBITDA margins in coming quarters. GSFC expects payment of balance INR 7 bn AS subsidy in 1-2 quarters. Melamine plant capex is expected to be commissioned by September...

Net revenues increased by 39% yoy to Rs15.4bn driven by robust volume growth in fertilisers (+40%) as well as healthy performance in chemical division. EBITDA increased by 100% yoy to Rs1.6bn and EBITDA margins expanded by 340 bps yoy to 10.5%. Chemical revenues stood at Rs4.7bn (+8% yoy) led by 7% yoy volume growth in caprolactam. Segment EBIT grew 3x yoy to Rs721mn driven by 42% yoy increase in caprolactam-benzene spread to US$1100/MT. EBIT margins improved 1,125bps to 15%. channel inventory remains low due to higher consumption and lower imports in 9MFY18. Caprolactam-benzene spreads are expected to remain at US$1000/MT in FY18....

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