Chambal Fertilizers is one the largest private sector fertilizers producer in India. It caters to the need of the farmers in many states in Northern, Eastern, Central and Western regions of India and is the lead fertilizer supplier in the state of Rajasthan. The company is engaged in manufacturing of Urea with three Urea plants at Gadepan, District Kota, Rajasthan. Besides, the company is engaged in marketing of fertilizers and agrochemical products.
Overview
The company sells products under its own brand i.e., Uttam Vir which has a strong presence in its markets.
Presently, the company has a market share of ~12% in Urea, ~13% in DAP (Di-ammonium Phosphate), 2% in MOP (Muriate of Potash) and 2% in NPK (nitrogen, phosphorus, and potassium) in the domestic market.
Presently, the company has a wide distribution network of ~3,700 dealers and ~50,000 retailers across the country. It has access to ~90% of total market size of fertilizers in India.
Investment Summary
CMP (₹)
316.55
52 Week H/L (₹)
516.00/216.80
Market Cap (Crores)
13,181
Face Value (₹)
10.00
Promoter Holding*
60.48
Non-promoter Holding*
39.52
Book Value (TTM ending 2022-06)
161.25
EPS (TTM ending 2022-06)
36.67
The above chart shows the comparison between the monthly returns of the stock price of Chambal Fertilizers and Nifty Midcap 50 returns over a period of last 2 years.
Q1 FY2023 Overview
Quarterly (INR in crores)
Jun-21
Sep-21
Dec-21
Mar-22
Jun-22
Sales
3,539.52
4,478.61
4,743.33
3,307.37
7,291.18
Expenses
2,958.35
3,741.76
4,160.59
2,945.94
6,697.80
Operating Profit
581.17
736.85
582.74
361.43
593.38
Other Income
74.89
97.71
128.14
73.64
41.99
Depreciation
73.34
75.18
76.17
75.05
76.06
Interest
30.41
24.84
24.13
26.55
48.11
Profit before tax
552.31
734.54
610.58
333.47
511.20
Tax
170.99
228.77
175.41
89.67
169.49
Net profit
381.43
505.92
435.06
243.57
341.82
Business of the Company
Chambal Fertilisers & Chemicals Ltd is engaged in production of Urea from its own manufacturing plants. It also markets/ deals in other fertilisers and Agri-inputs. It also has a Joint Venture for manufacture of Phosphoric Acid in Morocco.
The company’s product portfolio includes fertilizer’s and Agri-inputs such as Urea, Di-ammonium Phosphate (DAP), Muriate of Potash (MOP), Ammonium Phosphate Sulphate (APS), different grades of NPK fertilizers, Sulphur, Micronutrients and Agrochemicals. It only manufactures Urea from its production plants and markets/ trades other fertilizer’s and Agri-inputs through its distribution network.
In FY21, sale of manufactured products which primarily constituted of Urea accounted for ~58% of revenues and trading of other fertilisers and other Agri-inputs accounted for the rest ~42% of revenues.
Presently, the company owns and operates 3 manufacturing plants with a capacity of ~3.4 Million Tonnes p.a. The company commissioned its 3rd plant in Jan 2019 with a production capacity of ~1.35 Mantra of Urea. The plant enabled the company to increase it market share in Urea and expand in new geographies in eastern, western and southern parts of India.
Performance Analysis
The company has reported a consolidated revenue of ₹7291.18 Cr in the Q1 of FY2023, which was highest for any quarter, strong performance was driven by healthy demand across both urea and non-urea products, higher sales volumes and higher gas prices.
The operating profit margin was at 8% for the quarter, which is lowest in last 3 years, the decreasing profit margins are a cause of increasing power & fuel expenses, increasing freight & forwarding and increase in packing material expenses.
The company has decreased its long term borrowings but its short term borrowings have increased from ₹772 Cr in 2021 to ₹1852 Cr in 2022.
The collection and recovery of the company seems to be weaker as the company has increased its trade receivables and even has negative cash flow from operating activities.
Ratio Analysis and Comparison
RATIOS
Chambal Fertilizers and Chemicals Ltd.
Coromandel International Ltd.
Deepak Fertilizers and Petrochemicals Corporation Ltd.
Stocked Score
P/E Ratio (TTM)
8.62
16.90
12.48
5/5
P/B Ratio (TTM)
1.96
4.17
2.77
5/5
ROE (%)
21.64
26.55
20.87
3/5
ROCE (%)
20.81
36.86
19.98
3/5
Debt to Equity Ratio (%)
0.68
0.00
0.67
3/5
^Coromandel International Ltd. Is the leader in the fertilizer’s sector and Deepak Fertilizers and Petrochemicals Corporation Ltd is almost of the size in terms of market cap
Technical Analysis
The stock price of the company is trading at ₹316.55 and with a correction of almost 39% from its ATH.
The stock is trading above its support levels of ₹316.60 , if it breaches this level its next support is at ₹303.42.
On the upside, it is facing a resistance at ₹329.15, it can see a up move up to levels of ₹345-350 if it breaks the resistance.
Analyst’s Opinion
Falling profit margins are a negative point for the company, but one positive for investors is that it is constantly paying out dividends to the shareholders.
The negative investing cash flow and balance sheet of the company suggest that the company is constantly increasing its assets and investing in other investments as well.
The stock is trading at 1.96 times its book value which is less than its competitors and on basis of other ratios as well the company looks fairly valued among its peers.
On technical aspects, the price is stuck between the range of 300-345 for the last 4 months, breakout on any side of the range will define the short term direction of the price.
Promoters have a significant holding of 60.48% in the company and are constantly increasing their stake since 2019, but a major concern is that their pledging is also increasing year on year.
Revenue from operations of all the products in company’s portfolio is increasing.
