It's that time of the year when people await the Union Budget with bated breath. The whole nation has great hopes for the forthcoming Union Budget 2022.
The fate of several industries will be discussed in the upcoming budget, which will be held on February 1, 2022.
Today, we want to focus on one of the most important sectors of the Indian economy – Fertiliser sector.
The Indian government plans to allocate nearly $19 billion in its federal budget to compensate fertiliser companies who sell their products at lower than market prices to farmers, reported Bloomberg.
Following the withdrawal of three farm law bills last year, five states including Uttar Pradesh, are set to hold elections earlier this year. This step is believed to placate farmers.
The increase in fertiliser subsidies may aid fertiliser businesses in recouping volumes lost last year due to higher input costs. The rise in subsidy would also assist farmers in coping with chemical firms' price hikes in order to reduce input costs.
Agriculture is the primary source of livelihood for about 58% of India's population. Based on this, India's fertiliser sector is incredibly essential. It produces some of the most crucial raw materials for agricultural production.
The growing population of India is also one of the benefits for the fertiliser business. It would result in increased demand in the future.
With the help of Equitymaster's powerful stock screener, we've narrowed down the best fertiliser firms in India for you to track.
These are the stocks that came up when we ran the screener for top fertilizer companies in India.
1. Chambal Fertilisers & Chemicals
Chambal Fertilisers and Chemicals is a manufacturer of urea and di-ammonium phosphate (DAP).
It's the largest manufacturer of urea in the private sector with an installed capacity of 1.5 m tonnes per annum (MTPA).
The company's segments include fertilisers and other agri inputs, own manufactured phosphoric acid, textile, shipping, and others.
It was also engaged in software business. But in 2021, it sold assets and transferred certain liabilities of the business to cease the software operations.
The firm has a wide distribution network of 3,700 dealers and 50,000 retailers across the country. It has presence in states such as J&K, Haryana, Uttarakhand, Punjab, Uttar Pradesh, Bihar, West Bengal, Madhya Pradesh, Rajasthan, and others. It has access to 90% of total market size of fertilisers in India.
For the September 2022 quarter, the net profit of Chambal Fertilisers rose 15.8% to Rs 5.1 billion against Rs 4.4 billion during the same quarter last year.
The company will declare the December quarter results on 28 January 2022. It will also provide information related to dividend pay outs.
So far, the stock price has risen 111% to Rs 477 as on 20 January 2022 from Rs 214 in the same month last year.
2. Coromandel International
Coromandel International is a part of the Murugappa Group. The group has presence across various industries such as auto components, abrasives, financial services, transmission systems, cycles, sugars, farm inputs, fertilisers, plantations, etc.
The company is one of India's leading agri solutions providers. It offers a diverse range of products and services across the farming value chain.
It specialises in fertilizers, crop protein, bio-pesticide, specialty nutrients, organic fertilizers, etc. The company distributes its products through a network of 20,000 dealers and 2,000+ market development team.
It owns and operates 16 manufacturing facilities across India in Tamil Nadu, Karnataka, Andhra Pradesh, Maharashtra, and other locations.
Coromandel International shares have underperformed in the last one year, declining by about 8%. Investor confidence has been affected by the irregular monsoon.
However, the company's profitability prospects seem bright, thanks to anticipated growth in the upcoming Rabi crop season.
The company did well on the revenues front for the quarter ended 30 September 2022, registering a growth of 34% over the previous year.
3. Rama Phosphates
Rama Phosphates (RPL) is one of the leading phosphatic fertilizer manufacturers, i.e. single super phosphate (SSP) fertilizer manufacturing, in India.
The company also produces oleum, nitrogen, phosphorous, and potassium (NPK), de-oiled cake, and soya oil.
It's trademark brands, ‘Suryaphool' and ‘Girnar' are well recognised in the farming community.
On the financial front, Rama Phosphates net profit rose 101.1% to Rs 227.2 million in the quarter ended September 2021 against Rs 113 million during the previous quarter in 2020. The company's strong performance was on the back of higher operational revenue.
Over the last 5 years, the company has delivered good profit growth of 39.3% compound annual growth rate (CAGR).
That apart, ace investor Dolly Khanna has picked up additional stake in this multibagger fertilizer stock, as per the December 2021 shareholding data.
Dolly Khanna has bought around 0.4% stake in Rama Phosphate, taking the total holding to nearly 2.3%, or 4 lakh equity shares in the company.
The fertiliser stock in the last one-year has delivered multibagger returns of 320%, while in a month's time, it has gained 31%.
4. Dharamsi Morarji Chemical
Dharamsi Morarji Chemical company is engaged in manufacturing of bulk chemicals and specialty chemicals used in industries such as pharmaceuticals, detergents, dyes, etc.
This smallcap company was among the first producer of sulphuric acid and phosphate fertilisers in India.
It's a multi-product, multi-locational company and has emerged as the single largest manufacturer of SSP in India as well as a major producer of heavy chemicals.
It has two manufacturing facilities located in Roha and Dahej.
The company is backed by a number of key clients including Alkyl Amines, IPCA, Apcotex, Aurobindo, Dow, Deepak Nitrite, Pidilite etc.
The company recorded a strong growth in revenues in September 2022 quarter as the revenues increased 61% to Rs 725.3 m against Rs 497.7 m in the same period last year. The growth is due to higher realisations and moderate increase in volumes.
However, earnings before interest, taxes, depreciation, and amortization (EBITDA) margins and profitability suffered on account of sharp increase in the prices of raw materials and freight costs.
The company recorded strong performance in the specialty chemicals segment despite the challenging operating environment. It remains confident about passing on the increasing input costs to customers in this segment.
The outlook for the specialty chemicals remains strong. The company is witnessing strong demand from domestic as well as export customers.
In the past year, the company has managed to double its investor wealth. The share price has surged over 100% during the period.
5. Deepak Fertilisers
Deepak Fertilisers and Petrochemicals (DFPCL) is an Indian manufacturer of industrial and agricultural chemicals, crop nutrients, and fertilizers. It also owns real estate.
The company has marketed fertilizers under the brand name of ‘Mahadhan' since 1990.
Deepak Fertilisers is one of the largest manufacturers of chemicals in India. It manufactures technical ammonium nitrate (mining chemicals), industrial chemicals, and crop nutrition. These products have uses in explosives, mining, infrastructure, and healthcare.
Recently, Deepak Fertilisers' Smartchem Technologies, a fully-owned subsidiary, said that Odisha's Chief Minister Naveen Patnaik had laid the foundation stone for a Rs 22 billion technical ammonium nitrate complex.
The complex, located at the Gopalpur Industrial Park, will have an annual capacity of 377-kilo tonne and is scheduled for commissioning by August 2024.
Once completed, the project will help Odisha become a key supply source for technical ammonium nitrate, serving the entire Eastern region, from where a majority of future mining growth is expected to come.
This bodes well for the company.
Deepak Fertilizers reported a 16% YoY jump in consolidated net profit to Rs 933.3 million in the second quarter ended September, primarily driven by higher income.
The net income in the second quarter increased to Rs 18 billion from Rs 14.2 billion in the year-ago period.
Deepak Fertilisers share price has delivered around 45.5% return to its shareholders in the last one month, while in the last six months the chemical stock has given around 29% return.
While, in the past one year, it has given around 230% return to its investors.
Snapshot of top fertilizer stocks in India from Equitymaster's stock screener
Here's a quick view at the above mentioned companies based on some crucial financials.
Please note these parameters can be changed according to your selection criteria.
This will help you in identifying and eliminating stocks that are not meeting your requirements and give emphasis on those stocks that are well inside the metrics.
Given the importance of agriculture, the fertiliser business is one that the Indian economy cannot afford to ignore.
The share of agriculture in gross domestic products (GDP) increased to 19.9% in 2020-21 from 17.8% in 2019-20. The last time the contribution this high was in 2003-04.
Agribusiness is a life-sustaining industry and it offers excellent investment opportunities.
However, not all agricultural stocks are the same. Each business has its own set of concerns. When deciding which agricultural stocks are suitable, examine how these opportunities and risks fit with your investment preferences.
Look for companies which are innovating. Think agritech, which has huge untapped potential. Although at a nascent stage, agritech is bound to change the way agriculture business is done.
To conclude, when it comes to investing, the stock you choose must be credible. Investors should put their money into a firm that has a proven track record of success.
If there isn't enough confidence in the stock, it can make the initial investment weak and deplete it before it has a chance to grow.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
(This article is syndicated from Equitymaster.com)
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)