GSFC hits record high, up 9% on heavy volumes and stable business outlook

The higher stock levels, coupled with likely momentum to be achieved in fresh production/imports, FY24 is likely to witness a situation of comfortable availabilities in the fertilizer sector

Shares of Gujarat State Fertilizers & Chemicals Limited (GSFC) rallied 9 per cent on the BSE to a record high of Rs 204.50 in Monday’s intra-day trade amid heavy volumes. In the past two trading days, the stock of the fertiliser company has surged 17 per cent on a stable business outlook.

The stock surpassed its previous high of Rs 193.40 touched on September 6, 2023. The average trading volumes on the counter jumped nearly 10-fold today. A combined 18.8 million equity shares, representing 4.7 per cent of total equity of GSFC, changed hands on the NSE and BSE till 10:33 AM. In comparison, the S&P BSE Sensex was down 0.02 per cent at 66,271.

GSFC is a public sector undertaking promoted by the Gujarat government (GoG). GoG, through its undertaking, Gujarat State Investment Ltd (GSIL), owns 37.84 per cent of the paid-up capital of the company.

GSFC operates in two segments fertilizers and industrial products, with integrated manufacturing facilities enabling it to benefit from synergies by manufacturing a host of fertilizers and industrial products.

Fertilizers contribute around 60-70 per cent to the total operating income, whereas industrial products contribute a balance of 30-40 per cent.

GSFC manufactures fertilizers like di-ammonium phosphate (DAP), ammonium sulphate (AS), ammonium phosphate sulphate (APS) and urea, and industrial products like caprolactam, nylon-6, melamine, MEK oxime, and polymers, among others.

With better availability of fertilizers through alternative countries, besides opening up exports through China, the impact of the Russia-Ukraine war has relatively diffused. Therefore, availability of fertilizers, especially P&K products may not remain a constraint, unlike the situation faced over the past 2 years.

Import prices of two major fertilizers, DAP & Urea have prevailed significantly lower during Q1-23/24, which are the lowest in the past two years.

Similarly, the prices of raw materials like PA, Ammonia, Sulphur are having consistently declining trend, which will support the domestic industry to follow higher production. Prices of PA & Ammonia have declined in the range of $970 & $300 PMT , respectively, during the period of Q1-23/24.

Significant increase in Urea production achieved through revival of the old plants will extend a great relief to tovernment for its imports. As followed during FY 2022-23, the govt may proportionately curtail Urea imports further in FY 2023-24.

The higher stock levels of fertilizers in the country as on April 1, coupled with likely momentum to be achieved in fresh production/imports, FY23-24 is likely to witness the situation of comfortable availabilities in the fertilizer sector, GNFC said in its FY23 annual report.

Adequate availability of major products like DAP & Urea and its reasonable MRP may continue to be challenging to sustain market growth for products like AS & APS.

Selling prices of fertilizers are unlikely to get increased, at least in the Kharif’23 season. The prevailing price trend of raw materials and its adequate availability will support Phosphatic production at our Sikka Unit, the company said.

Meanwhile, going forward, CARE Ratings expects the revenue from operations and profitability of GSFC to moderate in FY24 as compared with FY23 levels due to a decrease in the input prices and resultant decrease in fertilizer prices. However, the performance of its industrial products division is likely to improve in FY24 with expectation of pickup in demand from downstream industries resulting in improved demand for melamine and improved caprolactam-benzene spread, the rating agency said in a rationale.

The ‘Stable’ outlook on the rating reflects that the rated entity shall continue to maintain its dominant position in most of its products alongwith maintaining its highly comfortable financial risk profile, CARE Ratings said.