Fertiliser shares in focus; Deepak Fertilisers, RCF rally over 10%

With the forecast of normal monsoons and the rollout of Covid vaccination programme in the coming months, CARE Ratings expects economic activities to normalize during FY22

Shares of fertilisers companies were in focus at the bourses on Thursday, with Deepak Fertilisers & Petrochemicals Corporation, Rashtriya Chemicals & Fertilizers (RCF) and National Fertilizers rallying between 10 per cent and 18 per cent on the BSE in intra-day trade on expectation of higher demand.

Zuari Agro Chemicals, Chambal Fertilisers & Chemicals, Coromandel International, Gujarat State Fertilizers & Chemicals (GSFC) and Gujarat Narmada Valley Fertilizers & Chemicals were up 3 per cent to 5 per cent on the BSE. In comparison, the S&P BSE Sensex was up 0.81 per cent at 50,065 points, at 10:00 am.

Among individual stocks, NFL surged 18 per cent to Rs 64.05 on the back of two-fold jump in trading volumes. Earlier this month, the company said it recorded highest-ever total fertiliser sale of 5.9 million MT in 2020-21, beating its previous best of 5.70 million MT achieved during 2019-20. This includes sale of company’s own Urea, imported Urea and other P&K fertilisers.

On the production front, the company produced 3.8 million MT of urea in its plants recording a capacity utilisation of 117.6 per cent despite severe restrictions of Covid-19 and other despatch related challenges due to farmers’ agitation in Punjab. In the plants, Panipat unit has set a new production record of Urea and Bentonite Sulphur and Vijaipur Unit produced highest-ever volume of biofertilisers, the company said.

According to CARE Ratings, the rural demand and markets has been buoyed and very promising despite the coronavirus pandemic and macroeconomic uncertainty. This has translated in improving the underlying macros for the Indian fertilizer industry.

Agricultural operations have been well placed and have grown backed by a bumper Rabi harvest and good monsoon during the Kharif season. With surplus reservoirs levels, record high kharif crop sowing and plentiful rainfall during the monsoon season, demand for the procurement of fertilizers has been promising till date, the rating agency said in March month sector update.

With the forecast of normal monsoons and the rollout of Covid vaccination program in the coming months, we expect the economic activities to normalize during FY22. Currently, IMD is forecasting a normal monsoon, which will commensurate in moisture levels being healthy and water levels too remain elevated as well. This will lead to the acreage being favourable as well. So from that standpoint, we should see the consumption and the growth in demand to continue, it said.