Re: Jubilant Industries -FY12e 850 cr. Revenues -US$ 3 bn. Group Backing-World-Leader
Small fertiliser firms: Outlook is strong, but valuations still low
30 Dec, 2011, 04.32AM IST
The new Nutrient-Based Subsidy (NBS) policy of April 2010 has significantly improved the prospects of single-super phosphate (SSP) industry. Companies' valuations, however, remain low in the current depressed market conditions.
As the NBS recognised sulphur as an important farm nutrient for subsidy, the SSP became competitive against the heavily subsidised di-ammonium phosphate (DAP). This boosted the SSP consumption in the country 29.2% to 3.6 million tonne. As a result, the industry's overall capacity utilisation jumped by 7 percentage points to 49.5%.
Apart from the higher volumes, even the margins improved substantially for the industry, with players such as Rama Phosphate, Basant Agro and Liberty Phosphate recording a double-digit margin for the first time.
Khaitan Chemicals, country's largest SSP producer, witnessed over 10-percentage-point margin expansion at 15.1% Almost all companies posted their highest-ever net profit in FY11. The combined net profit of the six listed SSP players -Basant Agro Tech, Khaitan Chemicals and Fertilizers, Liberty Phosphate, Rama Phosphate, Shiva Global Agro and Teesta Agro - more than tripled to .`117 crore.
These companies continued their dream run in the first half of FY12 as well, with Basant Agro, Liberty Phosphate and Teesta Agro posting a profit growth between 16% and 50%.
The performance of Rama Phosphate was down due to slack in its soya business while Khaitan Chemicals' was down due to forex losses. Existing players are making fresh investments to take advantage of the improved policy framework for SSP.
In FY11, the overall capacity inched up 1.7% to 7.9 mt. Leading player Rama Phosphate has also disclosed plans to expand capacities at its Udaipur, Indore and Pune plants.
Similarly, Basant Agro plans to expand the capacity of its SSP plant to produce 1.25 lakh tonne per annum.
Although the industry's improved prospects were cheered by the stock market in FY11, in the current depressed market conditions, the industry's valuations have fallen below its earlier levels.
The combined price-toearnings ratio for the six players has fallen from 3.1 in FY11 to 2.9 at present, which is below what it was in FY09 and FY10.