Dalal Street Investment Journal – July 20, 2019

DSIJ.in JULY 22 - AUG 4, 2019 I DALAL STREET INVESTMENT JOURNAL (^75)
phosphorus and potassium.
As per the data provided by ICRA, primary fertiliser sales
witnessed healthy growth of 4.5 per cent YoY in FY19 driven by
a 4.7 per cent YoY growth in the urea sales, along with a 4.3 per
cent YoY growth in P&K fertiliser sales. Indigenous urea sales
witnessed a 1.6 per cent YoY growth, while imported urea sales
witnessed 14.3 per cent YoY growth. DAP sales witnessed 5.9
per cent YoY growth, while sale of complex fertilizers witnessed
a 6.3 per cent YoY growth.
International urea prices have been trending around the
five-year average of $246/MT since August 2018, driven by the
elevated coal and natural gas prices, lower Chinese exports and
sanctions on Iran. The urea prices had started moderating in
the beginning of CY2019. ICRA expects the international urea
prices to witness an uptick in the near term, driven by
slowdown in exports of Iranian urea, upcoming Kharif season
in India when the demand is at its peak, coupled with low
operating rates of Chinese manufacturers as China focuses on
the domestic market. Also, the international DAP prices were
trending around the five-year average of US $397 per MT for
major part of CY2018 as production curtailments, slower
ramp-up of new capacities and rising trend in raw material
prices kept the prices firm.
Considering the overall performance of the fertilizer companies
in FY19, decline in operating and net profits was seen as the
raw material prices increased from end of 2018. For the
purpose of sectorial analysis, we have considered 11 leading
companies. The overall revenue of the sector jumped by 17.5
per cent during FY19. The operating profit for FY19 grew
marginally by 1.3 per cent, while the net profit dipped by 20.2
per cent in FY19.
Companies like Rashtriya Chemicals & Fertilizers and National
Fertilizers outperformed in FY19 as compared to others.
Rashtriya Chemicals’ revenue during the year grew by 22 per
cent, operating profit grew by 66.3 per cent, while net profit
increased by 76.6 per cent yoy. Also, national fertilizers’ revenue
grew by 36.7 per cent, operating profit jumped by 53.9 per cent
and net profit grew by 40.2 per cent yoy.
Budgetary allocation towards fertilizers subsidies has increased
by 14 per cent to 800 bn, which is expected to boost the fertiliser companies, especially the urea manufacturers. This increase is to account for inflation, the start-up of a new urea plant, and payment of pending dues of fertilizer companies since last year. According to ICRA, the performance of urea players is expected to remain stable in the upcoming Kharif season given the decline in the natural gas price which will keep the domestic production competitive against imports. In case of normal monsoon with equitable distribution across the country, ICRA expects positive uptick in fertiliser and agrochemicals industries. As per the data provided by ICRA, primary fertiliser sales witnessed healthy growth of 4.5 per cent YoY in FY19 driven by a 4.7 per cent YoY growth in the urea sales, along with a 4.3 per cent YoY growth in P&K fertiliser sales. Indigenous urea sales witnessed a 1.6 per cent YoY growth. 24.63 23.64 16.35 18.85 14.85 4.01 4.18 23.10 23.96 17.30 29.25 29.24 29.17 11.99 8.70 5.31 34.87 54.16 3.47 37.75 19.93 18.12 5.23 416.21 416.21 416.21 51.15 34.02 11.57 -0.35 -37.57 -6.12 50.33 18.86 14.58 4.97 155.42 155.42 155.42 11.89 10.65 10.44 34.67 32.54 4.08 11.62 6.81 6.89 8.13 79.70 79.70 79.70 1.43 3.25 3.06 22.02 66.34 76.61 -56.03 2.69 6.24 6.24 551.69 551.69 551.69 -2.02 -4.06 -6.99 2.41 268.50 NA NA 0.00 0.00 0.00 647.07 647.07 647.07 4.34 4.24 4.02 36.75 53.97 40.27 2.33 11.17 11.85 5.97 490.58 490.58 490.58 18.44 17.50 13.18 11.23 -15.75 -54.04 5.42 8.20 8.84 7.81 88.20 88.20 88.20 30.67 -5.22 -27.40 11.44 -41.21 NA NA 6.96 -3.34 -12.01 42.06 42.06 42.06 2.23 2.81 1.52 29.96 -10.14 52.93 -20.60 10.23 17.71 12.75 203.64 203.64 203.64 -0.36 -2.04 -1.49 -50.55 NA NA NA -1.99 -10.56 -6.13 59.81 59.81 59.81 EPS () YoY Growth FY19 (%) RoNW (%) Equity (` in Cr.)
FY19 FY18 FY17 Sales Operating Profit PAT EPS FY19 FY18 FY17 FY19 FY18 FY17