CMP: 455.05 Target Price: 552 Upside:21%
Reasons to Invest:
- GNFC today is one of the leaders in fertilizer industry. The company is engaged in manufacturing and selling fertilizers such as Urea and Ammonium Nitro-phosphate under the brand name of “NARMADA”. The company has initiated a unique and first of its kind, socio economic project of collection of neem seeds through the rural poor especially women to supplement their income and encourage them for organic farming. You may like this: CYIENT LIMITED – Fundamental Analysis
- On the development front, it has set up core chemical and petrochemical plants such as Methanol, Formic Acid, Nitric Acid, and Acetic; has India’s largest single stream plant of Aniline and the proposed di-calcium phosphate project in joint venture with Belgian company Eco Phos will be operational by 2019. Di-Calcium Phosphate is mainly used as dietary supplement in prepared instant food products including noodles. Moreover, the company is only manufacturer of Toluene Di-Isocyanate (TDI) in South East Asia and Indian Sub Continent. Its chemicals enjoy high brand value in niche market.
- The company is on a high growth trajectory as during the year FY17-18, performance of company is the best ever in its 42 years history, with improved financial performance, long term debt has been fully paid off as of that by making the prepayment of Rs. 534crore. These measures reduced the finance cost of the company by 51% Y-o-Y.
- The growth in revenue and profits are significantly led by non-TDI chemicals, both in terms of revenue and profits. Most of the plants performed well. For TDI the combined capacity utilisation stood at 93% during the year as against 73% last year. Also during the year Aniline, Ethyl Acetate, Formic Acid and Technical Grade Urea has also recorded highest production. The realization in Acetic Acid, Formic Acid and Ethyl Acetate were the highest in the last 6 years.
- The company is now planning to raise its acetic acid and formic acid production capacity. For the fourth quarter ended March 2018, the company’s net profit increased by 38% to Rs 329 crore as compared to Rs 238 crore in the same quarter of fiscal 2016-17. You may like this: Take Solutions | Fundamental Analysis
The management of the company is continuously focusing on increasing its capacity additions in chemical segment as well as to improve capacity utilization of its Dahej Plant and during the year; it has paid all of its long term debt and now planning to reduce its working capital. Moreover, it has developed requisite expertise and confidence with proven project management competencies. Thus, it is expected that the stock will see a price target of Rs.552 in 8 to 10 months time frame on a current P/Ex 8.81 and FY19 (EPS) of Rs.62.69.
Face Value Rs.: 10.00
52 Week High/Low 548.50 / 253.60
M.Cap Rs. in Cr.: 7072.39
EPS Rs.: 51.15
P/E Ratio (times) 8.90
P/B Ratio (times) 1.57
Dividend Yield (%) 1.65
Stock Exchange BSE
Above call is recommended with a time horizon of 8 to 10 months.
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