Agriculture is the main source of livelihood for about 58% of Indias population.
It was that time of year when everyone awaited the Confederate Budget with breath of panic. The whole country is placing high hopes on the upcoming Union Budget 2022.
The fate of several industries will be discussed in the upcoming budget, to be held on 1 February 2022.
Today, we want to focus on one of the most important sectors of the Indian economy – the Fertilizer industry.
Bloomberg reported that the Indian government plans to allocate nearly $19 billion in the federal budget to compensate fertilizer companies that sell their products at below-market prices to farmers.
After withdrawing three agricultural bills last year, five states, including Uttar Pradesh, will hold elections earlier this year. This step was supposed to appease the farmers.
The increase in fertilizer subsidies could help fertilizer businesses recover production lost last year due to higher input costs. The increase in subsidies will also help farmers deal with price increases by chemical companies to reduce input costs.
Agriculture is the main source of livelihood for about 58% of India’s population. Based on this, India’s fertilizer industry is in dire need. It produces some of the most important raw materials for agricultural production.
India’s population is growing is also one of the benefits for the fertilizer business. It will lead to increased demand in the future.
With the help of Equitymaster’s powerful stock screener, we have narrowed down the best fertilizer companies in India for you to follow.
These are the stocks that came up when we conducted our screening of the top fertilizer companies in India.
1. Fertilizers & Chemicals Chambal
Chambal Fertilizers and Chemicals is a producer of urea and di-ammonium phosphate (DAP).
It is the largest urea producer in the private sector with an installed capacity of 1.5 million tons per year (MTPA).
The company’s segments include fertilizers and other agricultural inputs, manufactured phosphoric acid, textiles, transportation, and others.
It is also engaged in the software business. But in 2021, it sold assets and transferred certain liabilities of the business to decommissioning the software.
The company has an extensive distribution network with 3,700 agents and 50,000 retailers across the country. It is present in states like J&K, Haryana, Uttarakhand, Punjab, Uttar Pradesh, Bihar, West Bengal, Madhya Pradesh, Rajasthan, and others. It has access to 90% of the total fertilizer market size in India.
In the September 2022 quarter, net profit of Chambal Fertilizers increased 15.8% to Rs 5.1 billion compared to Rs 4.4 billion in the same quarter last year.
The company will announce December quarter results on January 28, 2022. It will also provide information regarding dividend payment.
So far, the share price has increased by 111% to Rs 477 on January 20, 2022 from Rs 214 in the same month last year.
2. Coromandel International
Coromandel International is a division of the Murugappa Group. The Group has a presence across a wide range of industries such as automotive components, abrasives, financial services, powertrains, cycles, roads, farm inputs, fertilizers, plantations, etc
The company is one of India’s leading agricultural solutions providers. It offers a wide range of products and services across the farming value chain.
The company specializes in fertilizers, crop protein, bio-pesticide, special nutrients, organic fertilizers, etc. The company distributes its products through a network of 20,000 agents and more than 2,000 development teams. market development.
It owns and operates 16 manufacturing facilities across India in Tamil Nadu, Karnataka, Andhra Pradesh, Maharashtra and other locations.
Shares of Coromandel International have underperformed over the past year, falling about 8%. Investor confidence has been affected by the unusual monsoon.
However, the company’s profit outlook looks bright, thanks to growth predictions in the upcoming Rabi crop.
The company performed well in terms of revenue for the quarter ended September 30, 2022, recording 34% year-over-year growth.
3. Rama Phosphates
Rama Phosphates (RPL) is one of the leading phosphate fertilizer manufacturers, i.e. single super phosphate (SSP) fertilizer producer, in India.
The company also produces oleum, nitrogen, phosphorus and potassium (NPK), defatted cakes and soybean oils.
Those are the trademarks, ‘Suryaphool’ and ‘Girnar’ which have been widely recognized in the farming community.
In financial terms, net profit of Rama Phosphates increased by 101.1% to Rs 227.2 million in the quarter ended September 2021 from Rs 113 million in the previous quarter in 2020. company thanks to higher operating revenue.
Over the past 5 years, the company has delivered strong earnings growth with a compound annual growth rate (CAGR) of 39.3%.
Additionally, lead investor Dolly Khanna has purchased additional shares in this multibagger fertilizer stock, according to December 2021 equity data.
Dolly Khanna bought about 0.4% shares of Rama Phosphate, bringing the total number of shares held to nearly 2.3%, equivalent to 40,000 shares in the company.
Fertilizer stockpiles over the past year have yielded a multibagger return of 320%, while in a month’s time it has increased by 31%.
4. Chemical Dharamsi Morarji
Dharamsi Morarji Chemical Company specializes in the production of bulk chemicals and specialty chemicals used in industries such as pharmaceuticals, detergents, dyes, etc.
This small-cap company is one of the first producers of sulfuric acid and phosphate fertilizers in India.
It is a multi-product, multi-local company and has emerged as the largest SSP producer in India as well as a major producer of heavy chemicals.
It has two production facilities located in Roha and Dahej.
The company is supported by several key clients including Alkyl Amines, IPCA, Apcotex, Aurobindo, Dow, Deepak Nitrite, Pidilite, etc.
The company recorded strong growth in revenue in the September quarter 2022 as revenue increased 61% to Rs 725.3 million compared to Rs 497.7 million in the same period last year. The growth is due to higher awareness and moderately increased volume.
However, profit before interest, tax, depreciation and amortization (EBITDA) was affected by the sharp increase in raw material prices and transportation costs.
The company recorded strong performance in the specialty chemicals segment despite the challenging operating environment. It remains confident about passing on increasing input costs to customers in this segment.
The outlook for specialty chemicals remains strong. The company is seeing strong demand from domestic as well as export customers.
Over the past year, the company has managed to double the wealth of its investors. The stock price has increased by more than 100% during this time.
5. Deepak Fertilizer
Deepak Fertilizers and Petrochemicals (DFPCL) is an Indian producer of industrial and agricultural chemicals, plant nutrients and fertilizers. It also owns real estate.
The company has been marketing fertilizers under the brand name ‘Mahadhan’ since 1990.
Deepak Fertilizers is one of the largest chemical manufacturers in India. It produces technical ammonium nitrate (mining chemicals), industrial chemicals and plant nutrients. These products are used in explosives, mining, infrastructure and healthcare.
Recently, Deepak Fertilizers’ Smartchem Technologies, a wholly owned subsidiary, said that Odisha Minister Naveen Patnaik has laid the groundwork for a technical ammonium nitrate complex worth Rs 22 billion.
The complex, located at Gopalpur Industrial Park, will have an annual capacity of 377 kilotons and is scheduled to come online in August 2024.
Once completed, the project will make Odisha a major source of technical ammonium nitrate, serving the entire Eastern region, where the majority of future mining growth is expected.
This bodes well for the company.
Deepak Fertilizers reported a 16% increase in consolidated net profit year-on-year to Rs 933.3 million for the second quarter ended September, driven mainly by higher earnings.
Net income in the second quarter rose to Rs 18 billion from Rs 14.2 billion in the same period last year.
Deepak Fertilizers stock price has delivered a return of about 45.5% for its shareholders over the past month, while over the past six months, chemical stock has delivered a return of about 29%.
While, in the past one year, it has brought about 230% returns for its investors.
Snapshot of top fertilizer stocks in India from Equitymaster’s stock screener
Here is a quick look at the companies mentioned above based on some key finances.
Please note that these parameters can be changed according to your selection criteria.
This will help you identify and weed out stocks that don’t meet your requirements and emphasize stocks with good indexes.
To conclude
Given the importance of agriculture, the fertilizer business is an industry that the Indian economy cannot afford to ignore.
Agriculture’s share of gross domestic product (GDP) will increase to 19.9% in 2020-21 from 17.8% in 2019-20. The last time this level of contribution was high was in 2003-04.
Agribusiness is a life-sustaining industry and it offers excellent investment opportunities.
However, not all agricultural stockpiles are the same. Each business has its own concerns. When deciding which agricultural stocks are right for you, examine how these opportunities and risks align with your investment preferences.
Look for companies that are innovating. Think of agritech, there is huge untapped potential. Although in its infancy, agritech is bound to change the way agribusiness is done.
To conclude, when it comes to investing, the stock you choose should be reliable. Investors should put their money in a company with a proven track record.
Without enough confidence in the stock, it can weaken the initial investment and drain it before it has a chance to grow.
Happy investing!
Disclaimer: This article is for informational purposes only. It is not a stock recommendation and should not be treated as such.
(This article is provided from Equitymaster.com)
(This story has not been edited by NDTV staff and was automatically generated from the feed provided.)
