Company Review: Chambal Fertilisers

Company Review: Chambal Fertilisers
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First Published: Tue, May 19 2009. 10 11 AM IST
Updated: Tue, May 19 2009. 10 11 AM IST
Chambal Fertilisers and Chemicals’ (Chambal’s) Q4FY09 net sales grew by 43.4% y-o-y to Rs8,708 million (our expectation was Rs7,773 million), on the back of higher trading sales and other income.
Adjusted PAT grew by 107.9% to Rs593 million against our expectation of Rs618 million.
Net sales of urea business grew by mere 8.8% to Rs4,853 million since the company had shut down Gadepan-1 plant for 36 days during the quarter due to hook-up activities for de-bottlenecking of plant.
Trading sales have grown by 831% to Rs1,535 million (Our expectation was Rs1,175 million).
The company has added three ships in H1FY09, which resulted in a y-o-y growth of 61.7% in the shipping business revenue to Rs1,211 million in Q4FY09.
EBIT margins of all the segments were as per our expectation, except trading business.
During the quarter, the company has changed the accounting treatment for interest to trading creditors by charging into operating cost instead of finance cost as earlier.
Hence, Chambal has charged full year interest in Q4FY09 that resulted in lower finance cost and loss in trading business during the quarter.
Valuation
Chambal’s 90% of the urea business is on cost plus 12% post tax ROE (i.e. fixed earning) basis and shipping business is on time contract till FY10.
Hence, we believe that a downward pressure on earnings would be less. We expect PAT to grow at two year’s CAGR (FY09-11E) of 9.5%.
On the basis of historical rolling band chart of last ten years, Chambal has traded in the range of 4x-16x. We maintain our ACCUMULATE rating on the stock, on the basis of 9x at FY10E earnings.
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First Published: Tue, May 19 2009. 10 11 AM IST
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