Smallcap fertiliser stock zooms 53% in 4 weeks on hopes of normal monsoon

In the past two days, the stock price of Paradeep Phosphates soared 16% after the India Meteorological Department (IMD) on Tuesday predicted an "above normal" monsoon in 2025.

Shares of Paradeep Phosphates (PPL) hit a new high of ₹ 139, surging 4 per cent on the BSE in Wednesday’s intra-day trade, extending its previous day’s over 10 per cent rally on hopes of a normal monsoon this year. In the past four weeks, the stock zoomed 53 per cent. It has more-than-doubled or skyrocketed 124 per cent from its 52-week low of ₹ 62 touched on June 6, 2024.

 

In the past two days, the stock price of smallcap fertiliser company soared 16 per cent after the India Meteorological Department (IMD) on Tuesday predicted an “above normal” monsoon in 2025, which quantitatively could be 105 per cent of the Long Period Average (LPA).

 

 

Last week, private weather forecasting agency Skymet also said that cumulative all-India southwest monsoon this year could be “normal” at 103 per cent of the LPA.

 

The forecast is with a model error of plus and minus 5 per cent. This is the second year running when the IMD has predicted an “above normal” monsoon. Last year in April, it had predicted monsoon to be almost 106 per cent while the actual rains were 108 per cent of the LPA.

 

PPL is one of India’s largest private sector phosphatic players, producing a wide range of phosphatic grades, including DAP, N-10, N-12, N-14, N-19, N-20 and N28. At present, PPL has a total capacity of around 3 million MT, of which 0.4 million MT is urea and the balance 2.6 million MT is phosphates. The company has two large manufacturing facilities - one at Paradeep in Odisha and another at Zuarinagar, Goa. 

 

For the first nine months (April to December) of the financial year 2024 -25 (FY25), production and sales volumes stood at 1,908,313 MT and 2,290,443 MT, reflecting a year-on-year (YoY) increase of 4 per cent and 13 per cent, respectively. Additionally, the company’s nano fertilizer segment gained traction, with about 1.40 million bottles sold in the first nine months of FY25. 

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The management said the company maintained steady performance in production and sales over the past quarters, aided by favorable rainfall, moderate inventory levels, and government support. Given the growing need for food security, healthy soil, and balanced fertilization, coupled with favorable government policies, the fertilizer demand in the country is expected to remain strong, the management said.

 

According to rating agency ICRA, the profitability of PPL is expected to improve because of the commissioning of the backward integration projects in phosphoric acid and sulphuric acid that will make the operations more cost-effective. The backward integration into manufacturing phosphoric acid is materially EBITDA accretive vis-à-vis imported acid. 

 

Further, the energy saving capex at the urea plant will improve the profitability of the urea unit as well. The company is also in the process of commissioning a sulphuric acid plant at its Paradeep facility, enhancing the capacity to 2 MTPA from 1.4 MTPA.  Moreover, there has been a steady growth in volumes, which has improved the capacity utilisation and ensured a steady growth in revenue generation, the rating agency said in rationale.

 

PPL’s operations are partially backward integrated into the production of phosphoric acid by using rock phosphate and sulphuric acid, which provides cost advantage to PPL as the phosphoric acid produced is cheaper than the imports. 

 

PPL is further working on expanding the phosphoric acid capacity to 0.7 million tonnes as well as the sulphuric acid capacity to 2 million tonnes from 1.4 million tonnes. It is also undertaking capex to improve the energy efficiency at its urea plant, which is expected to bring down the energy consumption of the Goa unit to 6.10 Gcal/MT vis-a-vis the norm of 6.5 Gcal/MT. 

 

These initiatives are expected to improve the cost structure further and improve the contribution margins, thereby aiding the overall profit generation, ICRA said.

 

Structurally as well as in the short term, analysts at Elara Capital said they prefer fertilizer companies such as Coromandel International and Paradeep over agrochemical sector given that the import replacement of volume and profits is set to play out for the fertilizer sector. The Fertilizer industry is also fully insulated from the impact of US tariffs. Further, China is not a major player in the Indian fertilizer industry because of huge barriers to entry, the brokerage firm said in sector report.