Tushar's Stock Tips: Nagarjuna Fertilizers & Chemicals Limited :Future Bluechip

Tuesday, August 14, 2007

Nagarjuna Fertilizers & Chemicals Limited :Future Bluechip

Business Profile
Nagarjuna Fertilisers & Chemicals (NFCL) is the flagship company of the Nagarjuna Group with an asset base of around Rs 21 billion. It is the largest private sector investment in the south and the first gas-based fertilizer plant in the region. The company primarily deals in urea and sells other fertilizers on a selective basis. NFCL is into manufacturing and supplying of plant nutrients in India. The company is being operated through three strategic business units - Straight Nutrition Business, Nutrition Solutions Business and Nagarjuna Management Services.

NFCL witnessed increased market share for urea in Andhra Pradesh (51%), West Bengal (35%) and a major market share in Orissa (46%). The company`s annual installed capacity stands at 20.51 million MT of urea in India. It also imports from Oman Indian Fertilizers, which has a production capacity of 1.65 million MT per annum of urea. It has invested in various subsidiaries namely Nagarjuna Oil Corporation, Nagarjuna Power Corporation and Jaiprakash Engineering and Steel Company.

NFCL plans to leverage its soft assets, provide consultancy and development services in areas of fertilizer operations and supply chain management. The company is exploring plans to revamp its plants and increase its production capacity and/or diversify the product mix in future, while continuing to focus on businesses like specialty fertilizers and micro-irrigation.

Nagarjuna Fert,a Future Bluechip.
In medium to long term it will outperform the market.This will be another Jaiprakash Associates in making.You can imagine a comany having raw material(natural gas) reserves at it's door step i.e at Kakinada.Kakinada port at it's doorstep and market of Andhra,WestBengal & Orissa are very near to it's plant.The area of it's plant is 1130 acre,so when RIL will start production of Gas in Apr`2008 and winhin 2-3 years ONGC and others will start producing Gas from K.G.Besin,they can consider for further expension (from 1.7 million ton) and if urea will be decontrolled they can go for Export at a much higer price than Domestic market.

At present their Gross profit is in the range of 20%,By 2008-09 their turnover will be approx.3000 Crore(1.7 million Ton capacity) and Gross profit will be 25% (Due to availability of Natural Gas) i.e 750 Crore.I believe within 07-08 their loan will be reduced to 500 crore from existing 1400 Cr.So after interest and depreciation Net profit will be around 600 crore which will give EPS of Rs.14/- on an equity of 450 Croe(after issuing 2.25 Crore shares to It's Core promoters).So you can expect a price of Rs.150/-by Dec`2008.

I am not considering their income from other activities such as micro irrigation and plant nutrition.Further from the Financial year 2009-10 Their refinary & power plant will contribute into the bottom line. I really can't estimate their net profit of 2009-10 at this point of time.I am also not considering the brand value of their well established Brand 'Nagarjuna' in the fertilizer market.

Their Portal 'ikisan'is very popular among farmers,one should visit the portal.The value of their land will be 5000-6000 crore considering the oil & gas exploration activity in K.G.Besin.

I am not making any story but trying to highlight Facts which any one can cross check.I believe very soon Nagarjuna fert will be recognised as the best Fertlizer company in India because of it's locational advantage.

This is the reason why FII's are increasing their holding in NFCL, more than their holding in any other fertilizer company in India.All Big mutual funds Like Tata and many others are increasing their holding in NFCL.Motilal oswal and India Bulls are recommending their clients to buy NFCL.One can understand by studying,activity in cash & F&o segment.I hope it will help you in taking decision

Nagarjuna Fert will be proved multibagger for it's shareholders due to following facts:

1) Plant is situated at Kakinada, where many co's including Reliance have discovered huge reserves of natural gas,basic raw material for Fert.Prod.Nagarjuna fert will be able to receive sufficient gas without paying any transportation charges.

2) Expanding capacity from 1.2 million ton to 1.7 million ton, operational by the end of 2008.It will increase Top line as well as bottom line without much increasing overheads.

3) The value of land at Kakinada is approx.6000 crore,Rs.130/ -share at present and the value will increase with the increased
activity of Gas & oil exploration in that field.

4) 51% stake in Nagarjuna Oil,6 Million Ton E.O.U refinary coming
up at cuddalore (Tamilnadu)in which 26% stake is taken by Tata Petrodyne,10% by I.O.C.L and 5% by TIDCO.

5) 26% stake in Nagarjuna Power,1015 MegaWatt power plant coming up
at Mangalore, in which 74% stack is with Hyd.based Lanco group.

6) Shareholder' s will get free shares of NOCL & NPCL.

7) International prices of urea are shooting up.

8) In the Domestic market no new manufacturing unit is coming up
to bridge supply Demand gap.

9) Total Decontrol of urea is on the card.

10) Strong cash flow of Rs.200 cr.giving Rs.5/-cash EPS.

Expect a price of Rs.214/- within 3 years

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