Gujarat Narmada Valley Fertilizers Company Ltd - No respite for fertilizer business - Emkay

Reco: BUY
CMP: Rs 85
Target Price: Rs 105

* Q1FY13 results disappointed due to reported losses in fertiliser division & lower chemical margins. PAT declined 21% yoy to Rs 327mn despite 35% increase in revenues.

* Removal of additional subsidy of Rs 2500/mt on complex fertilizer by government and FX loss of Rs 120mn on MoP trading hit fertilizer business profitability.

* Chemical margins at 17.4% disappointed due to pressure on realizations. Downgrade FY13/FY14 est by 20%/7% to Rs 17/24.3 due to pressure in fert business & lower chem. margins.

* Expect stock to trade at discount to BV through its capex phase. Reduce price target to Rs 105 based on 0.6x FY13 BV of Rs 175, however maintain BUY due to attractive upside.

Source : Equity Bulls

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