Dalal Street Investment Journal - - SPECIAL REPORT -

Gu­jarat Nar­mada Val­ley Fer­til­iz­ers & Chem­i­cals Lim­ited is In­dia's in­dus­trial chem­i­cals and fer­til­izer man­u­fac­tur­ing ma­jor. The com­pany has wide­spread oper­a­tions in in­dus­trial chem­i­cals, fer­til­iz­ers and in­for­ma­tion tech­nol­ogy seg­ments. The com­pany is en­gaged in pro­duc­tion and sales of a range of fer­til­iz­ers, in­clud­ing urea and am­mo­nium ni­trophos­phate un­der the am­bit of its brand Nar­mada.

On the fi­nan­cial front, GNFC posted a 4.62 per cent de­cline in its net sales from ₹1,377 crore in the fourth quar­ter of FY16 to ₹1,313.56 crore in the fourth quar­ter of the fis­cal year 2017. The com­pany’s op­er­at­ing profit stood at ₹124.89 crore in Q4FY17, down by 49.39 per cent on a year-on-year ba­sis. How­ever, the profit after tax of the com­pany rose im­mensely and stood at ₹238.42 crore, up by 227.68 per cent in the fourth quar­ter of the fi­nan­cial year 2017 on a year-on-year ba­sis.

On an an­nual ba­sis, the com­pany’s net sales in­creased by 8 per cent to ₹4,945 crore in the fi­nan­cial year 2017, as against net sales of ₹4,548 crore in the pre­vi­ous fis­cal (2016). The com­pany’s PBDT stood at ₹715 crore in FY17, up by 72 per cent from ₹415.64 crore in the pre­vi­ous fis­cal. The com­pany’s net profit in­creased by over 130 per cent, from net profit of

₹226.36 crore in FY16 to ₹521.30 crore in FY17. On the val­u­a­tion front, the share price of GNFC is trad­ing at a PE mul­ti­ple of 8.94x, as against its peers such as Zuari Agro Chem's (81.54x), Gu­jarat State Fer­til­iz­ers & Chem­i­cals Lim­ited

(12.76x). The com­pany’s PE mul­ti­ple is lower than the in­dus­try PE mul­ti­ple of 19.17x, sug­gest­ing good scope of growth.

The nor­mal mon­soons and the im­ple­men­ta­tion of direct ben­e­fit trans­fer scheme by the gov­ern­ment will boost up farm in­vest­ments made by farm­ers, thereby in­creas­ing the de­mand for fer­til­iz­ers. GNFC is likely to ben­e­fit fur­ther from the pro­posed im­po­si­tion of anti-dump­ing duty on TDI by the gov­ern­ment, as the com­pany is the sole man­u­fac­turer of TDI in In­dia and has over 50 per cent of the to­tal mar­ket share for TDI. The gov­ern­ment is most likely to im­pose im­port re­stric­tions on fer­til­iz­ers. All these fac­tors make GNFC a good stock to in­vest in.

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