CHAMBALS FERTILISERS AND CHEMICALS LTD PICK OF THE WEEK

Aug 28, 2017

Industry CMP Recommendation Add on dips to Sequential Targets Time Horizon

Fertilizers Rs. 144 Buy at CMP and add on declines Rs. 124-128 Rs. 168-180 4-6 Quarters

Chambal Fertilisers& Chemicals Ltd (CFCL) was promoted by Zuari Industries Ltd, a K.K. Birla Group company in 1985. CFCL is
India’s largest private sector manufacturer of urea and is also involved in trading of agri-inputs such as complex fertilisers
(DAP, MOP, SSP), pesticides, seeds, etc. The company has two urea manufacturing units at Gadepan (Kota, Rajasthan), both
based on natural gas feedstock. The total installed capacity of both units is 1.73 million metric tonnes per annum (MMTPA).
HDFC Scrip Code CHAFEREQNR
The plants are being supplied natural gas through the Hazira-Vijaypur-Jagdishpur (HVJ) gas pipeline of GAIL. The company
BSE Code 500085
also commissioned its own SSP plant in Gadepan in FY13 with a capacity of 0.2 MMTPA.
NSE Code CHAMBLFERT
Bloomberg TALWALKARS
CHMB IN Investment Rationale:
CMP Aug 24 2017 Rs. 144  Favourable demand prospects for Urea and other complex fertilizers in domestic market could help Chambal encash
Equity Capital good times based on its manufacturing and trading strengths ,
416.2
(Rscr)  Long term gas contract (for existing and proposed plant/s) with GAIL ensures availability of gas going forward,
Face Value (Rs) 10.0
 Lower raw material prices could help lower interest costs going forward,
Eq- Share O/S(crs) 41.6
 Timely execution of Gadepan-3 plant (expected commissioning date Feb 2019) could help add revenues and margins,
Market Cap (Rscrs) 5993.4
 Gradual divestment of non-core assets to improve focus and return ratios.
Book Value (Rs) 51.1
Avg.52 Wk Volume 224657 Concerns:
52 Week High 146.3  Largely depends on government policy and payouts of subsidy:
52 Week Low 53.70  Delays in project execution:
 Possibility of higher Gas prices:
 Higher GST rate on imported phosphoric acid and ammonia
Shareholding Pattern % (June 30, 17)
 Unfavourable monsoon impacting demand
Promoters 57.9
Institutions 19.8
View and Valuation:
Non Institutions 21.8 Chambal is a leading player in Urea (manufactured) and complex (traded) in India. Recent favourable changes in policies,
Others 0.5 Expected commissioning of new capacity in Jan/Feb 2019 and increased focus on agriculture and food production are key
Total 100.0 triggers for Chambal. CFCL’s Urea capacity expansion plan is progressing as per schedule and the company expects the
commissioning of the new plant at Gadepan in January/February 2019. With the government introducing DBT (Direct
Benefits Transfer), we believe that companies across the sector are likely to benefit in terms of working capital cycle.
Chambal’s EPS would jump in FY20 post commissioning of the new plant.
FUNDAMENTAL ANALYST
Abdul Karim
We feel investors could buy the stock at the CMP and add on dips to Rs. 124-128 band (10.5x FY19E EPS) for sequential
Abdul.karim@hdfcsec.com
targets of Rs 168 (14.0x FY19E EPS) and Rs 180 (15.0x FY19E EPS). At the CMP of Rs 144 the stock trades at 12.0x FY19E EPS.

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 CHAMBALS FERTILISERS AND CHEMICALS LTD PICK OF THE WEEK
Aug 28, 2017

Financial Summary:
KEY HIGHLIGHTS Particulars (Rs Mn) Q1FY18 Q1FY17 YoY-% Q4FY17 QoQ-% FY16 FY17 FY18E FY19E
Sales 19662.9 19078.6 3.1% 10727.6 83.3% 90079.5 75534.5 79035.8 80905.7
EBITDA 2132.2 2434.8 -12.4% 846.3 152.0% 7560.8 7761.7 8517.7 8802.5
 CFCL is India’s largest private sector APAT 1353.0 1406.6 -3.8% 587.5 130.3% 3053.1 3829.9 4679.0 5006.4
manufacturer of urea and company Diluted EPS (Rs) 3.3 3.4 -3.8% 1.4 130.3% 7.3 9.2 11.2 12.0
is also involved in trading of agri- P/E (x) 19.6 15.6 12.8 12.0
inputs such as complex fertilisers
EV / EBITDA (x) 14.5 13.5 14.0 15.6
(DAP, MOP, SSP), pesticides, seeds,
RoE-% 14.8% 19.2% 20.2% 18.5%
etc.
Source: Company, HDFC sec)
Company Profile:
 The company has two urea Chambal Fertilisers& Chemicals Ltd (CFCL) was promoted by Zuari Industries Ltd, a K.K. Birla Group company in 1985. CFCL
manufacturing units at Gadepan is India’s largest private sector manufacturer of urea and company is also involved in trading of agri-inputs such as
(Kota, Rajasthan), both based on complex fertilisers (DAP, MOP, SSP), pesticides, seeds, etc. The company has two urea manufacturing units at Gadepan
natural gas feedstock. The total (Kota, Rajasthan), both based on natural gas feedstock. The total installed capacity of both units is 1.73 million metric
installed capacity of both units is tonnes per annum (MMTPA). The plants are being supplied natural gas through the Hazira-Vijaypur-Jagdishpur (HVJ) gas
1.73 million metric tonnes per pipeline of GAIL. The company also commissioned its own SSP plant in Gadepan in FY13 with a capacity of 0.2 MMTPA.
annum (MMTPA).
CFCL also has a 33.33% stake in Indo Maroc Phosphore SA (IMACID), Morocco, a major producer of phosphoric acid.
 The demand for fertilisers in H1 Chambal Fertilisers caters to the need of the farmers in twelve states in northern, eastern, central and western regions of
FY18 should witness good recovery, India and is the lead fertiliser supplier in the State of Rajasthan. The Company has a vast marketing network comprising 15
given the lower base for H1 FY17 regional offices, 2,000 dealers and 20,000 village level outlets.
and satisfactory progress shown by
monsoon leading to growth in Subsidiaries (As on 31 st March 2017)
Kharif sowing. Company Type Country Holding -%
CFCL Ventures Ltd Subsidiary Cayman 72.27
 CFCL has signed a contract with GAIL ISGN Corporation USA Subsidiary U.S. 72.27
(India) Limited for the purchase of ISG Novasoft Technologies Ltd Subsidiary India 72.27
gas and the contract, which will last Chambal Infrastructure Venture Ltd Subsidiary India 100
for 9 years from the date of India Steamship Ltd Subsidiary India 100
commencement. India Steamship Pte Ltd Subsidiary Singapore 100
Inuva Info Management Pvt Ltd Subsidiary India 51.32
India Steamship International FZE Subsidiary U.A.E. 100
Indo Maroc Phosphore S.A, Morocco Joint Venture Morocco. 33.33
(Source: Company, HDFC sec)

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 CHAMBALS FERTILISERS AND CHEMICALS LTD PICK OF THE WEEK
Aug 28, 2017

Business Overview:
Fertilisers and other Agri-inputs segment includes manufacture and marketing of Urea, Single Super Phosphate (SSP) and
purchase and sale of other fertilisers and Agri-inputs.
Shipping segment includes transportation of crude oil and liquid products through vessels owned and/ or hired by the
Shipping Division. The division has been classified as held for sale and discontinued operations on March 31, 2017
Industry Overview:
Product wise Chemical Fertilizers are classified into Urea, Diammonium Phosphate (DAP), Single Super Phosphate (SSP),
Muriate of Potash (MOP) and other Complex fertilizers like Calcium Ammonium Nitrate (CAN) and various grades of NPK
Fertilizers (Fertilizers having different grades of Nitrogen (N), Phosphorus (P), and Potassium (K) ). In India the most widely
used fertilizer in the Nitrogenous category is Urea, DAP and MOP for Phosphorus and Potassium respectively.
Urea is an inexpensive form of nitrogenous fertilizer. Urea is synthetically produced in enormous quantities. Although urea
often offers farmers the most nitrogen for the lowest price in the market since it is heavily subsidized by the Indian
Government, it should be used judiciously to avoid the soil turning acidic in nature. Urea contains 46% nitrogen. Urea is
the only “Controlled Fertilizer” which means the Government controls the MRP of Urea.
DAP is a concentrated fertilizer with high phosphorus and nitrogen content. It can be applied directly to soil of a mixture
with other fertilizers and to all soil types. The best effects are achieved when applied prior to sowing. The major
consumption of DAP is met through imports in the country.
Potassium chloride (commonly referred to as Muriate of Potash or MOP) is the most common potassium source used in
agriculture, accounting for about 95% of all potash fertilizers used worldwide. Its nutrient composition is approximately:
Potassium: 50% Chloride: 46%. The demand of MOP in India is entirely met out of imports.
The Indian Fertilizer Industry has shown tremendous growth in the last five decades and at present ranks third in the
world. India is the second largest consumer of fertilizers after China. India has second rank in the production of
nitrogenous fertilizers and third in phosphatic fertilizers whereas the requirement of potash is met through imports since
there are limited reserves of potash in the country.
No new capacities were added during last 17 years except revamp of few existing plants resulting into increasing
dependence on imports. The Government announced a favourable New Investment Policy for fertilisers in 2012. As per
the NIP 2012, the new plant would earn an EBITDA per ton of $ 130; driven by floor realization of $ 285 per ton.
It is proposed that only those units whose production starts within five years from the date of notification of the policy
(amended policy Oct 07, 2014) would be covered under the policy. The dispensation of guaranteed buy-back under this
policy will be available to the units for a period of eight years from the date of start of production.
The new unit will earn RoE of 12% (minimum) and going upto 20%. Further, new investments are given infrastructure
status – implying company can access funds at lower cost from banks and on a priority basis, ease of raising funds from
ECB route and certain tax concessions like exemption from IT for 10 years.

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 CHAMBALS FERTILISERS AND CHEMICALS LTD PICK OF THE WEEK
Aug 28, 2017

The country produces 24-25 million tonnes of urea, widely used as fertiliser, and imports 7 million tonnes to meet the
shortage.

Category- wise production of Fertilizers Production of Urea (in units of LMT)

(Source –HDFC Sec, CARE)

During the FY17 India has produced 413.24 LMT of fertilizers. Urea dominates the total fertilizer production in the country.
While India is the world’s second largest consumer of urea, the Government of India is working towards increasing the
production of urea so as to end imports by 2022 and achieve self-sufficiency in Urea Production.
The Make in India initiative is encouraging the production of fertilizers within the country to an extent the
governmentwants to eliminate the imports of urea by 2021 and make India self-sufficient. The Government has been very
proactive by introducing reforms time to time to help pick up pace for the production of fertilizers like under the New
Urea Policy, the government is incentivizing production beyond reassessed capacity.
According to the Food and Agriculture report world demand for total fertilizer nutrients is estimated to grow at 1.8% per
annum from 2014 to 2018. The demand for nitrogenous, phosphatic and potash is forecasted to grow annually by 1.4%,
2.2%, and 2.6%, respectively, during the period.

Investment Rationale:
Favourable demand prospects for Urea and other complex fertilizers in domestic market could help Chambal encash
good times based on its manufacturing and trading strengths:
Better than average monsoon: Better than average monsoon is one of the reasons to boost demand of urea and other
complex fertilizers. The demand for fertilisers in H1 FY18 should witness good recovery, given the lower base for H1FY17
and satisfactory progress shown by monsoon leading to growth in Kharif sowing.

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Complete roll out of fertiliser policy: Government has rolled out a fertiliser policy which has provisions of subsidies for the
domestic manufacturers. The policy aims to reduce the import of fertilisers components and make India self-sufficient.
Introduction of Direct Transfers Benefit:The introduction of Direct Transfers Benefit in the Fertilizer Industry has been a
boon to the fertilizer sector. Under the DBT scheme the subsidy will be released to the fertilizer companies instead of the
beneficiaries, after the sale is made by the retailers to the beneficiaries.Nearly two lakh point-of-sale (POS) machines have
been installed across the country for the roll out of the direct benefit transfer (DBT) for fertiliser subsidies by March 31,
2018.
Recent revision in the Urea Policy: Recent revision in the Urea Policy, which resulted in ‘higher ceiling’ in Import Parity
Price (IPP) comparison for production beyond re-assessed capacity (RAC), is positive for the sector as it will offer
confidence to investors and urea producers alike, that government is not shy of undertaking rational policy decisions
which support domestic urea policy.
Gas pooling for the Fertilizer (Urea) Sector: Under this policy effective from July 1st 2015 onwards the Government of
India proposed pooling of Domestic Gas with Re-Gasified LNG which is imported. This would help provide natural gas at
uniform delivered price to all Natural gas grid connected Urea manufacturing plants. The cost of gas, which is the most
important component for production of urea, varied from plant to plant owing to differential rates at which imported LNG
is contracted as well as cost of transportation. This situation is now normalised for all urea plants connected to the gas
grid. This will benefit players like Chambal.
The new gas pooling policy encourages production above cut-off which is beneficial for Chambal as it enjoy strong energy
efficiency at its plant.
Large trading exposure brings its own advantage:Chambal is one of the largest players in the complex fertilizer trading. It
has handled ~1mn MT+ of DAP / NPK. Company’s ability to handle significant volume of tradedfertiliser, source material
globally at competitive prices, sell though its distribution network and successfully managecurrency risk provides benefit
to the company.
These are some of the reasons which have brightened the prospects of the fertiliser companies like Chambal.

Long term gas contract with GAIL ensure availability of gas going forward for existing and new unit:
CFCL has signed a contract with GAIL (India) Limited in June 2017 for the purchase of gas and the contract will last for 9
years from the date of commencement of the new unit. The gas has been purchased mainly for their new urea plant being
set up at the existing site at Gadepan, Rajasthan. However, the gas can also be used at the company and existing plants in
Rajasthan. The annual contracted quantity is 24,955 billion British Thermal Units (BTU) on Gross Calorific Value (GCV)
basis. For existing units, it has a long term supply agreement with suppliers of natural gas.

Lower raw material prices could help for margins expansions going forward:
The fertiliser sector was favourably impacted by lower raw material prices in FY17 leading to margin expansion in FY17.
Lower interest expense driven by lower working capital borrowings coupled with declining interest rates provided further
support to profitability in FY17.Given the subdued raw material prices (Gas) and satisfactory progress of monsoon, urea
players could see stable profitability in FY18.

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Timely execution of Gadepan-3 plant (expected commissioning date Feb 2019) could help add revenues and margins.
CFCL is setting up a brown-field project at Gadepan in Kota with a capacity to produce 1.34 million tonnesurea fertilisers
per annum.CFCL’s this third Gadepan plant achieved 67% completion as on 25-July 2017, which provides comfort with
respect to its timely execution. CFCL has reported that the progress of the project is on the way to achieve the
commissioning of the plant by January-February 2019.
The company has spent ~Rs2200 cr on the project as on 30thJune 2017, (total capex ~Rs.5500 cr) with mainly the
construction work left to be done (engineering and procurement largely completed). Chambal has already tied up gas
supply of 2.2mmscmd (with GAIL and IOC) for the plant and has made arrangements to ensure water availability during
the non-rainy period (Oct-Jun). Ths capacity addition in an era when the demand of urea isincreasing gradually and India’s
production has been stagnant at ~24mnMT leading to higher importscould ensure better revenues/margins from FY20
onwards.
Chambal has highest market share among private sector Urea manufacturers. Post completion of Capex, which will add
1.34 mn MT, taking the total capacity to more than 3.0 mn MT, further strengthening its leadership position in the
industry.
Based on the cashflows generated by this project, by the end of initial eight year period, company would have almost
repaid the debt taken for this expansion as per our estimates. Also, the energy efficiency of the new plant is expected to
be far superior than existing industry standards – thereby reducing the performance sensitivity to RM costs in the long
term.

ONGC has also planned to set up a Rs 5,000 crore fertiliser plant in northern Tripura in association with the state
government and Chambal Fertilisers and Chemicals Ltd. However this proposal is at an initial stage.

Gradual divestment of non-core assets to improve focus and return ratios.

With the sale of shipping assets, Chambal has exited from all non-core businesses and has thus become a pure play on
fertiliser and agri-input segment. Over the last few years Chambal has made significant progress towards the divestment
of non-core businesses i.e. textile, IT (small portion of this is still left) and Shipping. Textile business was sold to Sutlej
Textiles & industries Limited (STIL) another erstwhile K.K Birla Group company on a slump sale basis during FY16. CFCL also
sold major portion of its IT software business in the U.S. and India while it also sold one of its ships during FY16 and the
balance in FY18.
The other business were either loss making or not generating enough profits. By divesting these, Chambal will be able to
focus on its core business and improve its return ratios over time.

Q1FY18 Results Review:

CFCL’s revenues grew 93.1% (YoY) despite Gadepan-2 plant being shut for maintenance for 30 days in Q1FY18 even as
trading volumes increased 38% YoY. This was led by higher demand on early onset of monsoon and pre-buying in
anticipation of increase in MRPs post-GST implementation. PAT almost flat at ~Rs1.4bn in Q1FY17 (YoY). The company also

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 CHAMBALS FERTILISERS AND CHEMICALS LTD PICK OF THE WEEK
Aug 28, 2017

benefited from lower finance cost (down 48.3% (YoY) during the quarter on reduction in borrowings with lower subsidy
outstanding (down ~Rs.700 cr over the quarter) and lower cost of borrowing.

Risks and Concerns:

Largely depends on government policy and payout of subsidy:
Chambal is highly dependent on the Government policies and changes in such policies may sometimes adversely affect the
Company. Direct Benefit Transfer (DBT) implementation being deferred till January 2018 is a setback in terms of
implementation of the system. Subsidy is major component of revenue of the Company and delay in payment of subsidy
by the Government creates stress on the working capital and increases the finance cost of the Company.
Delays in project execution:
The massive Rs5,500 crore urea capacity expansion plan at Gadepan would make the company one of the leading players
in the Urea space. Any delay in commissioning of this project could impact its operations and cash flow going forward.
Higher Gas prices:
The softness in R-LNG prices coupled with marginal downward revision in the domestic gas price will be favourable for
domestic urea players as the cost of production will remain low. Possible higher gas prices in future could lead higher
working capital borrowings impacting its margins.
Unfavourable monsoon:
Demand for Fertilisers is dependent to a large extent on favourable monsoon. Any shortfall in monsoon or irregular spread
could impact the demand for fertilisers.

View and Valuation:

Chambal is a leading player in Urea (manufactured) and complex (traded) in India. Recent favourable changes in policies,
Expected commissioning of new capacity in Jan/Feb 2019 and increased focus on agriculture and food production are key
triggers for Chambal. CFCL’s Urea capacity expansion plan is progressing as per schedule and the company expects the
commissioning of the new plant at Gadepan in January/February 2019. With the government introducing DBT (Direct
Benefits Transfer), we believe that companies across the sector are likely to benefit in terms of working capital cycle.
Chambal’s EPS would jump in FY20 post commissioning of the new plant.

We feel investors could buy the stock at the CMP and add on dips to Rs. 124-128 band (10.5x FY19E EPS) for sequential
targets of Rs 168 (14.0x FY19E EPS) and Rs 180 (15.0x FY19E EPS). At the CMP of Rs 144 the stock trades at 12.0x FY19E
EPS.

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Quarterly Financials – Standalone

Particulars (Rs Mn) Q1FY18 Q1FY17 YoY-% Q4FY17 QoQ-%
Net Sales 19662.9 19078.6 3.1% 10727.6 83.3%
Total Expenditure 17530.7 16643.8 5.3% 9881.3 77.4%
(Inc.) / dec. stock-in-trade 1076.1 -2580.1 -141.7% -1512.4 -171.2%
Consumption of raw materials 3201.6 3602.4 -11.1% 4297.9 -25.5%
Power and fuel 2185.3 2259.3 -3.3% 2666.5 -18.0%
Staff Cost 280.0 348.7 -19.7% 291.7 -4.0%
Other expenditure 1860.0 2682.7 -30.7% 1906.0 -2.4%
Purchase of goods for resale 8927.7 10330.8 -13.6% 2231.6 300.0%
EBITDA 2132.2 2434.8 -12.4% 846.3 152.0%
Other Income 485.1 727.8 -33.3% 563.4 -13.9%
PBDIT 2617.3 3162.6 -17.2% 1409.7 85.7%
Depreciation 178.8 248.9 -28.2% 165.7 7.9%
PBIT 2438.5 2913.7 -16.3% 1244.0 96.0%
Interest 439.2 890.3 -50.7% 401.8 9.3%
PBT & extra-ordinary items 1999.3 2023.3 -1.2% 842.2 137.4%
Provision for current tax 584.8 594.9 -1.7% 107.0 446.4%
Provision for deferred tax 61.5 21.9 181.0% 147.7 -58.3%
Net profit 1353.0 1406.6 -3.8% 587.5 130.3%
Adj Net Profit 1353.0 1406.6 -3.8% 587.5 130.3%
Adj EPS for the period (Rs) 3.3 3.4 -3.8% 1.4 130.3%
(Source: Company, HDFC sec)

Financials (Consolidated):
Income Statement
Particulars (Rs Mn) FY14 FY15 FY16 FY17 FY18E FY19E
Revenues 89,106 97,377 90,079 75,534 79,036 80,906
(Inc.) / Dec. Stock-in-trade 5,620 (527) (2,985) 26 - -
Materials 25,622 28,121 20,321 15,294 12,705 12,705
Power and fuel 13,075 13,818 12,507 9,589 9,973 10,172
Staff Cost 4,090 3,378 1,668 1,419 1,518 1,624
Other expenditure 15,271 16,309 10,229 9,167 9,901 10,000
Purchase of goods for resale 18,690 28,939 40,778 32,277 36,422 37,602
Expenditure 82,367 90,039 82,519 67,773 70,518 72,103
EBITDA 6,739 7,338 7,561 7,762 8,518 8,803
Depreciation 2,824 2,165 1,113 922 987 1,002
EBIT 3,915 5,173 6,448 6,840 7,531 7,801

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Other Income 1,050 1,051 766 1,370 1,425 1,496

Interest 2,074 1,632 2,659 2,540 1,920 1,768
PBT 2,891 4,592 4,555 5,670 7,036 7,528
Exceptional items - - (687) (41) - -
PBT after exceptional 2,891 4,592 3,868 5,629 7,036 7,528
Total tax 546 1,797 1,605 1,855 2,357 2,522
PAT 2,345 2,795 2,263 3,774 4,679 5,006
Minority Interest 96 151 413 27 - -
RPAT 2,441 2,946 2,676 3,801 4,679 5,006
EO (Loss) / Profit 123 108 (377) (29) - -
Adj PAT (Excl except items) 2,318 2,838 3,053 3,830 4,679 5,006
Adj EPS, Rs/ share 5.6 6.8 7.3 9.2 11.2 12.0
(Source: Company, HDFC sec)

Balance Sheet
Particulars (Rs Mn) FY14 FY15 FY16 FY17 FY18E FY19E
Equity Capital 4,139.5 4,139.5 4,162.1 4,162.1 4,162.1 4,162.1
General Reserve 16,423.7 18,371.5 14,506.9 17,073.3 20,827.0 24,908.2
Networth 20,563.2 22,511.1 18,668.9 21,235.4 24,989.1 29,070.3
Minority Interest 715.1 547.8 (768.7) (825.7) (825.7) (825.7)
Long term borrowings 10,194.3 7,818.7 10,728.7 14,319.8 38,028.7 57,028.7
Long term provisions 255.8 117.1 44.9 52.4 57.6 63.4
Short term Borrowings 34,369.8 30,178.2 39,207.2 31,859.0 27,207.2 27,207.2
Total Debt 44,564.0 37,996.8 49,935.8 46,178.8 65,235.8 84,235.8
Capital Employed 70,309.0 65,484.0 70,366.0 68,518.0 91,339.0 114,430.0
Tangible Assets
Net Block 28,112.8 27,220.4 17,456.9 11,281.2 11,460.9 10,859.2
Capital WIP 506.8 1,137.6 6,292.3 17,058.8 36,292.3 59,292.3
Total Fixed Assets 28,619.6 28,358.0 23,749.3 28,340.0 47,753.2 70,151.5
Long term loan and Advances 1,843.6 959.8 16.1 12.4 12.4 12.4
Other non-current asset 171.2 143.0 2,232.2 1,382.3 1,382.3 1,382.3
Current Assets 47,553.3 44,304.7 52,559.1 48,654.6 52,254.5 53,009.4
Inventories 6,855.4 7,387.1 8,683.9 8,493.5 7,578.8 7,758.1
Trade Receivables 35,594.9 31,711.6 38,612.0 30,362.0 30,315.1 29,924.0
Cash & Bank 1,975.1 2,039.3 542.7 1,321.4 5,882.9 6,849.6
Short term loan and Advances 2,524.3 2,311.7 4.8 3.2 3.2 3.2
Other Current Assets 603.5 855.0 4,715.7 8,474.5 8,474.5 8,474.5

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Current Liability 10,106.0 10,899.0 10,870.4 12,009.0 12,201.7 12,263.2

Trade Payables 3,043.6 3,549.4 4,493.3 2,405.7 2,598.4 2,659.9
Short term provisions 1,376.9 1,393.0 254.7 274.5 274.5 274.5
Other current liabilities 5,685.5 5,956.7 6,122.5 9,328.7 9,328.7 9,328.7
Capital Deployed 70,309.0 65,484.0 70,366.0 68,518.0 91,339.0 114,430.0
(Source: Company, HDFC sec)

Key Ratios
Particulars FY14 FY15 FY16 FY17 FY18E FY19E
Cash EPS 12.4 12.0 10.0 11.4 13.6 14.4
Market Cap (In Rs. Mn) 59,934 59,934 59,934 59,934 59,934 59,934
EV 1,04,802 98,788 1,09,327 1,04,791 1,19,287 1,37,320
Book Value (BV) 49.4 54.1 44.9 51.02 60.0 69.8
Valuation (x)
EV/Sales 1.2 1.0 1.2 1.4 1.5 1.7
EV/EBITDA 15.6 13.5 14.5 13.5 14.0 15.6
P/E (Fully Diluted) 25.9 21.1 19.6 15.6 12.8 12.0
P/BV (Fully Diluted) 2.9 2.7 3.2 2.8 2.4 2.1
P/CEPS 11.7 12.0 14.4 12.6 10.6 10.0
Mcap/Sales 0.7 0.6 0.7 0.8 0.8 0.7
Margin (%)
Gross Profit 44.0 41.9 35.5 37.0 37.8 37.8
EBITDA 7.6 7.5 8.4 10.3 10.8 10.9
EBIT 4.4 5.3 7.2 9.1 9.5 9.6
PBT 3.2 4.7 5.1 7.5 8.9 9.3
PAT 2.6 2.9 3.4 5.1 5.9 6.2
Growth (%)
Revenues 8.6 9.3 (7.5) (16.1) 4.6 2.4
EBITDA (1.5) 8.9 3.0 2.7 9.7 3.3
EBIT (6.1) 32.1 24.6 6.1 10.1 3.6
PBT (19.7) 58.9 (0.8) 24.5 24.1 7.0
PAT 7.6 22.4 7.6 25.4 22.2 7.0
Return Ratios (%)
ROE 11.9% 13.2% 14.8% 19.2% 20.2% 18.5%
Core ROCE 4.5% 5.1% 7.1% 8.4% 10.5% 11.0%
ROCE 5.6% 5.6% 6.8% 8.0% 7.5% 6.0%
Asset turnover ratio (x) 1.2 1.4 1.3 1.1 1.0 0.8
Inventory (days) 28.1 27.7 35.2 41.0 35.0 35.0
Debtor (days) 145.8 118.9 156.5 146.7 140.0 135.0
Other Current Assets (days) 12.8 11.9 19.1 41.0 39.2 38.2

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 CHAMBALS FERTILISERS AND CHEMICALS LTD PICK OF THE WEEK
Aug 28, 2017

Payables (days) 12.5 13.3 18.2 11.6 12.0 12.0

Other Current Liab & Provns (days) 19.6 16.7 25.8 46.4 44.3 43.3
Cash conversion cycle (days) 154.6 128.4 166.7 170.7 157.8 152.9
Debt/EBITDA (x) 7.0 5.6 6.6 5.9 7.7 9.6
Per Share (Rs)
Adj EPS-Diluted 5.6 6.8 7.3 9.2 11.2 12.0
BVPS 49.4 54.1 44.9 51.0 60.0 69.8
Leverage Ratio
Debt/Equity 2.3 1.8 2.7 2.2 2.6 2.9
Net Debt/Equity 2.2 1.7 2.6 2.1 2.4 2.7
Interest Cover 1.9 3.2 2.4 2.7 3.9 4.4
(Source: Company, HDFC sec)

One and Half Years of Daily Closing Price Natural Gas price Index

(Source: Company, HDFC sec)

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 CHAMBALS FERTILISERS AND CHEMICALS LTD PICK OF THE WEEK
Aug 28, 2017

Fundamental Research Analyst: Abdul Karim (abdul.karim@hdfcsec.com)

HDFC securities Limited, I Think Techno Campus, Building - B, "Alpha", Office Floor 8, Near Kanjurmarg Station, Opp. Crompton Greaves, Kanjurmarg (East), Mumbai 400 042 Phone: (022) 3075 3400 Fax: (022) 2496 5066
Website: www.hdfcsec.com Email: hdfcsecretailresearch@hdfcsec.com.
Compliance Officer: Binkle R. Oza Email: complianceofficer@hdfcsec.com Phone: (022) 3045 3600
__________________________________________________________________________________________________________________________________________________________________________________________
Disclosure:
I, (Abdul Karim, MBA), authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. HSL has no material adverse
disciplinary history as on the date of publication of this report. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.
Research Analyst or his/her relative or HDFC Securities Ltd. does not have any financial interest in the subject company. Also Research Analyst or his relative or HDFC Securities Ltd. or its Associate does not have beneficial ownership of 1%
or more in the subject company at the end of the month immediately preceding the date of publication of the Research Report. Further Research Analyst or his relative or HDFC Securities Ltd. or its associate does not have any material
conflict of interest.
Any holding in stock – No
HDFC Securities Limited (HSL) is a SEBI Registered Research Analyst having registration no. INH000002475.

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