HDFC Securities has upgraded Gujarat State Fertilizers & Chemicals (GSFC) to 'Buy' with target price of Rs 120 in its report.
GSFC reported a muted EBITDA of Rs 1.4 billion (+3% YoY) despite including the prior period subsidy of Rs 473 million. Weak performance was led by increase in the gas cost and maintenance shutdown in the caprolactam/melamine plants. Impact of lower interest and depreciation was negated by lower other income (-33%).
Commenting on the investment rationale, the stock broker said, ''FY12-14 was a tough period for GSFC characterized by a multitude of problems (muted cap-benzene spread, unavailability of cheap gas, excess channel inventory and high subsidy/farm receivables). PAT declined by 34% CAGR over the period.
Fertiliser business outlook has improved with low channel inventory, higher profits from neem based urea and chances of early subsidy disbursal from FY16. Outlook in the chemical segment is recovering with the expanding cap-benz spread. Stock price correction of 16% over the last 3-months has made valuations attractive. Upgrade to Buy, with a TP of Rs 120.''
Disclaimer: IRIS has taken due care and caution in compilation of data for its web site. Information has been obtained by IRIS from sources which it considers reliable. However, IRIS does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. IRIS especially states that it has no financial liability whatsoever to any user on account of the use of information provided on its website.