Multibagger in making – GNFC
Gujarat Narmada Valley Fertilizers Company (GNFC) is a chemicals and fertilizers manufacturing PSU which has given multibagger returns – 600% to its investors in the past 5 years. The company manufactures fertilizers like Urea, Ammonia, etc and chemicals like TDI, DNT, Methanol, Formic Acid, etc. The company has also forayed into launching Neem based FMCG products like Soap, Mosquito Repellent, etc. The company has a market capitalization of 6680 crores INR at CMP : 429.8 Rs. GNFC released its Q4 results today which were excellent to say the least. The revenues were up 40% YoY at 1764 crores INR. The PAT for the quarter stood at 790 crores INR, 40% higher YoY. The quarterly EPS came out to be 21.17. The company also gave a dividend of 7.5 Rs. Company’s consistently impressive results remain a key reason that it has maintained investors’ interest. Here are 5 key reasons why GNFC is a multibagger in making:
1) Cheap valuations
It is a chemicals and fertilizers company but market perceives it as a fertilizers company. At present valuations, it trades at a P/E of 7 which is way lower than its peers in the fertilizers as well as chemicals space. The fertilizers companies generally trade at around 15 P/E eg: Chambal Fertilizers – P/E of 16. And the chemicals companies generally trade at a P/E of 25-30. Hence, despite of tremendous growth, the stock looks undervalued.
2) Debt Free
The company paid off 1400 crores INR worth of debt to become virtually debt free last quarter. And being, a debt free company, it is bound to trade at more premium valuations.
The company is setting up a new DCP (Di-Calcium phosphate) plant with a capacity of 2 lac MTPA. This plant would be ready for production by 2018 and will boost the profitability of the company. Apart from that, the company aims to increase its revenues from Neem based FMCG products to 500 crores INR by 2020. These expansion programs will help GNFC further grow its EPS.
4) High price realizations
GNFC is the sole producer of TDI in India. This is used is foam of bedding and furnitures. In recent time, TDI is trading at very high prices resulting in great profitability. The prices are likely to remain high in the coming year as well. Also, the good monsoons expected this year would mean better fertilizer sales as well.
5) Big Investors’ interest
The stock is held by 38 Mutual Funds schemes : Aditya Birla, Reliance, Sundaram, DSP Blackrock, etc. Ace Investor Dolly Khanna also holds a stake in GNFC. This shows the high amount of trust that investors have in this stock. The annual EPS (TTM) being around 60 Rs. Given that its a debt free company and planned expansion can help GNFC’s share price a lot.
Disclaimer: I am not a SEBI registered analyst and not advising anyone to buy. The purpose of this article is to share my viewpoint about fundamentals and the future prospects of the company. So, please do not consider this as an investment tip. Talk to your financial advisor before taking any investing call.
Hi, I am Azhar, a management graduate from IIM Bangalore. I work as a manager in a FMCG firm. From college days, I had a lot of interest in equity markets. My passion for teaching led me to setup this site to educate retail investors about stock markets investments. Looking forward to learn and grow with you. Happy investing !!