Fertilizer shares in focus: RCF, GNFC, GSFC, NFL, Chambal surge up to 12%

Shares of RCF, NFL, GSFC, GNFC, Chambal Fertilisers, and Zuari Agro Chemicals were up between 5 per cent and 12 per cent

Shares of fertilizer companies were in focus as they rallied up to 12 per cent in Wednesday’s intra-day trade amid heavy volumes on hopes of healthy demand.

Shares of Rashtriya Chemicals & Fertilizers (RCF), National Fertilizers (NFL), Gujarat State Fertilizers & Chemicals (GSFC), Gujarat Narmada Valley Fertilizers & Chemicals (GNFC), Chambal Fertilisers & Chemicals and Zuari Agro Chemicals were up between 5 per cent and 12 per cent. In comparison, the S&P BSE Sensex was up 0.17 per cent at 61,526.

Among individual stocks, shares of RCF hit 12-year high of Rs 116.50 as they rallied 12 per cent after multiple-fold jump in trading volumes. The stock traded at its highest level since November 2010.

At 11:08 am; shares of RCF quoted 11 per cent higher at Rs 115.40 per share, as against 0.18 per cent rise in the S&P BSE Sensex. A combined 26.88 million equity shares, representing nearly 5 per cent of total equity of RCF, changed hands on the NSE and BSE.

The board of directors of RCF is scheduled to meet on November 29, 2022, in order to consider interim dividend for the financial year 2022-23 (FY23).

For July-September quarter (Q2FY23), the state-owned RCF posted 122 percent year-on-year (YoY) rise in its consolidated net profit to Rs 261.9 crore from Rs 117.9 crore, in the same period of the previous fiscal. Revenue from operations during the quarter, too, more-than-doubled to Rs 5,576 crore in Q2FY23 from Rs 2,612 crore in Q2FY22.

Therefore, analysts at Prabhudas Lilladher believe that the domestic fertilizer industry is well poised for structural growth, led by renewed emphasis towards food security as shortage and global supply chain recovers.

"The domestic agri-input industry holds immense growth potential given rising domestic demand, tighter global supply scenario from China (China controls around 40 per cent of the global phosphate exports); balanced plant nutrition (NPK ratio 4:2:1 v/s 7:3:1 currently) through higher agri-input penetration; higher usage of specialized nutrients led by change in dietary preferences and continued emphasis on improving farm productivity and farm income," said the brokerage firm.

Meanwhile, the normal monsoon in India during FY22-23 with its timely onset, promises for healthy fertilizer and demand. Better monsoon is again likely to favor higher sowing following FY21-22.

"Looking to the overwhelming demand for the fertilizers prevailing in the world market and many export restrictions currently in place, import prices are unlikely to improve in near future. On the other hand, GoI is also not expected to take a call on absorbing further burden of subsidy. The situation is triggering for continuation of struggle time for Industry," GSFC said.

In terms of retail prices of fertilizers, the company expects them to behave in a disciplined way during Kharif season i.e. no discounts and no extended credits on account of expected good seasonal prospects and tight supplies.