Gujarat state-run fertiliser and chemical manufacturer GSFC has outperformed the BSE Sensex by a wide margin in 2012 so far. Changes in the government’s subsidy rules have reduced the volatility in its earnings, while it is expanding its chemical business. Both these factors will enable the company to grow its earnings in the next few quarters.
With nearly two-thirds of the annual turnover coming from fertilisers, GSFC derives one-third of its revenues from industrial chemicals, including caprolactam and Nylon-6. The company enjoys the benefits of a fully-integrated plant where it manufactures everything from the basic raw material ammonia to final products such as urea, DAP or nylon. The company is a large producer of phosphatic fertilisers such as Di-ammonium Phosphate (DAP), Ammonium Sulphate and Ammonium Phosphate Sulphate. Strong operating cash flows helped GSFC emerge debt-free by the end of FY11. The company has now embarked upon various expansion projects that will put this excess cash to better use.
GSFC’s methanol plant is likely to commission by June 2012 with 173,000 tonne per annum (TPA) capacity. With methanol prices trading above $450 per tonne in the Asia-Pacific region and India being a net importer, GSFC’s profitability is likely to get a booster from the new capacity.
The company now gets 2.4 MMSCMD of natural gas from various sources such as APM, RIL’s KG basin, Panna-Mukta-Tapti and imported LNG, with an average cost of $6 per MMBTU. It will have to source additional gas for its methanol plant. Besides, the company’s joint venture in Tunisia-TIFERT will commission operations later this year, which will supply 180,000 tonne annually of phosphoric acid. The company still trades at a P/E valuation of 4.5 and a P/BV ratio of 1.2 with a dividend yield of 1.6%. This is lower when compared to its staterun or private sector peers.
With nearly two-thirds of the annual turnover coming from fertilisers, GSFC derives one-third of its revenues from industrial chemicals, including caprolactam and Nylon-6. The company enjoys the benefits of a fully-integrated plant where it manufactures everything from the basic raw material ammonia to final products such as urea, DAP or nylon. The company is a large producer of phosphatic fertilisers such as Di-ammonium Phosphate (DAP), Ammonium Sulphate and Ammonium Phosphate Sulphate. Strong operating cash flows helped GSFC emerge debt-free by the end of FY11. The company has now embarked upon various expansion projects that will put this excess cash to better use.
GSFC’s methanol plant is likely to commission by June 2012 with 173,000 tonne per annum (TPA) capacity. With methanol prices trading above $450 per tonne in the Asia-Pacific region and India being a net importer, GSFC’s profitability is likely to get a booster from the new capacity.
The company now gets 2.4 MMSCMD of natural gas from various sources such as APM, RIL’s KG basin, Panna-Mukta-Tapti and imported LNG, with an average cost of $6 per MMBTU. It will have to source additional gas for its methanol plant. Besides, the company’s joint venture in Tunisia-TIFERT will commission operations later this year, which will supply 180,000 tonne annually of phosphoric acid. The company still trades at a P/E valuation of 4.5 and a P/BV ratio of 1.2 with a dividend yield of 1.6%. This is lower when compared to its staterun or private sector peers.
No comments:
Post a Comment