KHAITAN CHEMICALS AND FERTILIZERS LTD.(KCFL)

Transcription

1 Date : 26 th September, 212 KHAITAN CHEMICALS AND FERTILIZERS LTD.(KCFL) Stock Performance Details Background Current Price : Rs ** Face Value : Rs. 1 per share 52 wk High / Low : Rs / Rs Total Traded Volumes : 7,357 shares** Market Cap : Rs. 132 crore** Sector : Fertilizers EPS (FY212) : Rs. 2.2 per share P/E (TTM) :. (x)^ P/BV (TTM) : 1.9 (x)^ Financial Year End : 1 st April 31 st March BSE Scrip Name : KHAICHEM BSE Scrip Code : **as on26 th September, 212; ^ as on June 212 Shareholding Details June 212 Particulars Shareholding Nos. (%) Promoter & Promoter Group Holding 7,27,36, Total Institutional Holdings (FIIs & DIIs) 1,22.1 Public Holdings 2,42,42, Total 9,69,89,2 1. Khaitan Chemicals and Fertiliers (KCFL) commenced its operations in 1987 at Nimrani near Indore, in Madhya Pradesh. The Company operates under two divisions broadly - Fertilisers & Chemicals and Soya Oil. Under the Fertilisers and Chemicals Segment, the Compay produces and sells Single Super Phosphate (SSP), Sulphuric Acid and its Derivatives. KCFL has the largest SSP manufacturing installed capacity in India at 911 MT with facilities in Rajasthan, Madhya Pradesh, Uttar Pradesh and Chattisgarh. During FY 212, the company produced MT. Sulphuric Acid is produced for internal consumption as well as external sales and its capacity stands at 276 MT. The Company has 14 TPD Soyabean Crushing Capacity with 1 TPD Edible Oil Refinery in Ratlam, Madhya Pradesh. KCFL's facilities are OHSAS 181 certified as well as ISO 141 certified for Environmental Management Systems. Strategy Focus The Company intends retaining its leadership position in the SSP segment and is undertaking expansion with 2 MT of SSP and Phospho Gypsum plant at Dahej, Gujarat. All No Objection Certificates have been received from the concerned authorities and KCFL is planning to start civil work on the same. KCFL also has plans of setting up a fertiliser plant in Neemuch in Madhya Pradesh and has applied for Environmental clearance for brownfield expansion at existing plants. In the Soy business, the Company enjoys locational advantage with easy availability of raw material near its plants. An Initiative of the BSE Investors Protection Fund 1

2 Financial Snapshot Particulars Standalone Financials (Rs. in Million) Income Statement FY12 FY11 FY1 Net Sales / Income from Operations 6, , ,21.7 Expenses Cost of material consumed Change in Inventories 83.9 (181.6) (512.4) Employee Benefit Expenses Administrative & Other Expenses 1, EBIDTA Depreciation & Amortization Finance Costs / Interest Expense Other Income Profit After Tax (PAT) Key Ratios Income Statement EBIDTA Margin (%) PAT Margins (%) Balance Sheet Networth 1, , Non Current Liabilities / Loan Funds ,73.8 Non Current Assets / Fixed Assets Inventories 1, , ,236.8 Debtors Key Ratios Balance Sheet Debt : Equity (x) Book Value (BV) (in Rs.) Return on Capital Employed (ROCE) (%) Return on Equity (ROE) (%) Debtors Turnover Ratio (x) Inventory Turnover Ratio (x) Valuation Ratios P/E (x) P/BV (x) EV / EBDITA (x) Source : Capitaline.com; as on year ended 31 st March, 212 From the Research Desk of LKW s Gurukshetra.com The primary business segments of the company are the Fertilizer and Chemicals Division and the Soya Division. Of these however, the Fertilizer & Chemicals Segment contributes about 75% to the overall revenues of KCFL while, the balance is contributed by the Soya Division. Net Income from Operations increased by 41% y-o-y and stood at Rs.6,444.3 million in FY 212 as compared to that of FY211. This has been on account of an increase in production of Single Super Phosphate. Notwithstanding the increase in topline, the increase in raw material prices and overall cost of sales, the EBIDTA as well as EBIDTA margins came under pressure and stood at Rs. 66 million in FY212 and 9.4% respectively. The same in FY211, was at Rs million and 15%. An Initiative of the BSE Investors Protection Fund 2

3 Total Expenses for FY212 as a percentage of sales stood at 9.6% as against 85% in FY211. This is primarily on account of an increase in cost of raw material which has been impacted due to inflationary pressures. Moreover, the prices of key raw materials like Rock Phosphate increased by 5% during the year and are expected to remain firm in the near term. On account of this, and a lower Nutrient Based Subsidy (NBS) announced by the Government for FY213, the impact on the profitability and margins for companies in the Chemicals & Fertilizer Sector including KCFL could be severe. Resultantly, with a lower operating profit, increased finance costs and loss incurred on account of volatility in the Indian Rupee vis-à-vis the US Dollar, the bottomline too remained subdued at Rs million in FY212 with margins of 3.4%. During FY212, there has been an increment of over 3% in Debtors for the company. The same stood at Rs million as compared to Rs million. Resultantly, the working capital management efficiency too has slipped as the debtor s turnover ratio slid from 67.8(x) in FY 211 to 23.1(x) in FY212. However, in terms of turning over the stock of goods, the company has been able to improvise on the same. The inventory turnover ratio, improved from 3.3(x) during the last fiscal to 4(x) in the fiscal ended 31 st March, 212. Over the longer term, Governmental policies would continue to impact the performance of the Fertilizer industry as it is highly regulated given that it is directly related to agriculture which is the primary activity in the country. This in turn, would impact the performance of the company. Given the slowing down of the economy and the weak monsoon season witnessed during Q1 FY13, the performance of KCFL remained under pressure. The net sales de-grew by 27% and stood at Rs million as compared to Rs. 1,85.2 million for the corresponding period during the previous year. Further, with the increased cost of inputs, loss on foreign currency transactions and lower topline growth the company reported a loss at the EBIDTA and PAT level. Performance on the Bourses Stock Performance as on 26 th September % Khaitan Chem. Fer. BSE Small Cap An Initiative of the BSE Investors Protection Fund 3

4 Peer Comparison The below mentioned tables provide a snapshot of the company s financial performance during FY212 as compared to some of its peers with a similar business operations. About the Industry Standalone Financials (Rs. in Million) Particulars Khaitan Chemicals Liberty Phosphates Net Sales 6,444 4,865 EBIDTA PAT EBIDTA Margins (%) PAT Margins (%) P/E (x)^ P/BV (x)^ Debt : Equity (x) EV / EBITDA (x)^ Source : Capitaline Database, ^TTM as on June 212 The Indian economy is predominantly agrarian in nature and as a result, the Indian fertilizer industry has tremendous scope in the country as it is one of the vital inputs for enhancing agri produce. However, India has the tremendous task of feeding its fast increasing population. In order to be self sufficient in food grains, heavy reliance will have to be placed on fertilizers. SSP fertilizer is cost effective and provides phosphorous and sulphur at lower cost. Hence, small and marginal farmers prefer to use it because it is easily affordable. The major portion of agricultural land in India is Sulphur deficient, and it adversely affects the crop yield. Single Super Phosphate (SSP) fertilizer contains Sulphur and Calcium besides Phosphorus so it is an ideal manure to eliminate sulphur deficiency of soil resulting into increase in yield of pulses, groundnut etc. to a great extent. The importance of SSP in improving soil health of the country is recognized in the recent policy pronouncement of the Union Government s Finance Act, 212. The Nutrient Based Subsidy Policy also lays emphasis on the usage of SSP which is more farmer friendly, environment friendly and affordable. It also helps saving foreign exchange as they can be substituted for imported, finished P&K fertilisers. The company is highly regulated and the key concerns are delay in subsidy disbursement, uncertain rainfall and volatility in raw material costs. The Soy industry is facing raw material shortage with excess crushing capacities in India. The total crop size in India is around 1-11 million tonnes out of the 25 million tonnes, globally. Its (Soya) consumption in India is yet to pick up due to lack of awareness and high quantity of exports due to availability of incentives. Both Soyabean and Soya Oil are actively traded on the Commodity Exchanges in India. Soya beans are crushed and oil is extracted while the remnant is termed as oil cake or soyabean meal. It is a speculative product given the high volatility in the international markets. Globally, Soyabean Meal represents 65% of animal feed. Outlook Agriculture and allied sectors are considered to be the mainstay of the Indian economy. They are an important source of raw materials and demand for many industrial products, particularly for Fertilizers, Pesticides, Agricultural implements and a variety of consumer goods. They contribute nearly 22% of Gross Domestic Product (GDP) of India. With ever increasing population and limited land available for agriculture, it is imperative to increase productivity. Fertilisers serve this purpose well and hence the demand going forward can be expected to remain robust especially for SSP. The Demand for Soya is also expected to increase with rising awareness and level playing fields in the industry for domestic supplies. An Initiative of the BSE Investors Protection Fund 4

5 Financial Graphs Net Income from Operations Rs, in Million 7, 6, 5, 4, 3, 2, 1, 4,58 6,444 2,22 FY1 FY11 FY12 EBITDA & EBITDA Margins Rs. in Millions % FY1 FY11 FY12 EBIDTA EBIDTA Margins PAT & PAT Margins Rs. in Millions % FY1 FY11 FY12 PAT PAT Margins Disclaimer All information contained in the document has been obtained by LKW s Gurukshetra.com from sources believed to be accurate and reliable. Although reasonable care has been taken to ensure that the information herein is true, such information is provided as is without any warranty of any kind, and LKW s Gurukshetra.com in particular makes no representation or warranty express or implied, as to the accuracy, timeliness or completeness of any such information. All information contained herein must be construed solely as statements of opinion, and LKW s Gurukshetra.com shall not be liable for any losses incurred by users from any use of this document or its contents in any manner. Opinions expressed in this document are not the opinions of our company and should not be construed as any indication of our recommendation to buy, sell or invest in the company under coverage. An Initiative of the BSE Investors Protection Fund 5

6 Disclosure Each member of the team involved in the preparation of this report, hereby affirms that there exists no conflict of interest. The report has been sponsored and published as part of Initiative of BSE s Investors Protection Fund About Us LOTUS KNOWLWEALTH (LKW), commenced business in 199 and is currently engaged in providing WEALTH ADVISORY, CORPORATE ADVISORY and ECONOMIC & FINANCIAL RESEARCH & CONTENT services. LKW s ECONOMIC & FINANCIAL RESEARCH & CONTENT division currently generates Reports on Economic & Industry Trends, Global & Indian Equity Markets, Fundamental Analysis of IPOs, Companies & Industries, Management Meeting Reports, Balance Sheet & Financial Analysis Reports and an Economic Political and Sentiment Barometer. LKW also conducts Capital Market related Training Programs and has cutting edge expertise in Mutual Fund Analysis and specializes in Grading of Mutual Fund Schemes and IPOs. GURUKSHETRA.com is an online initiative of LKW that focuses on Personal Finance while theipoguru.com is India s Premier Primary Market (IPO) Portal. Contact Us LOTUS KNOWLWEALTH Pvt. Ltd. Regd.Office : B Wing, 55-56, Fairlink Centre, Off Andheri Link Road, Andheri (W), Mumbai consulting@lotusknowlwealth.com Tel : Website : An Initiative of the BSE Investors Protection Fund 6