Stock Review: GSFC

The monsoons this year have been very good and hence, I have a positive view on most agriculture stocks. GSFC is a very robust and financially strong company.

The company is into making fertilizers to the extent of about 2 million tonne per annum and are also making urea and complex fertilizers seen in very few of the companies like Tata Chemicals or may be RCF. The company has both the product profiles of urea and complex fertilizers and is also making Caprolactam, which is an industrial product, close to about 90000 tonne per annum.

 In Q1 of FY11 the company reported a PAT of Rs 142 crore on the topline of Rs 1200 crore, which translates into an EPS of about Rs 70-75 for FY12, with a PE multiple of close to about Rs 5. The company has a cash balance of Rs 750 crore and that translates into a value per share of Rs 100. It also has major holdings in GFNC and GIPCL. The value of these investments are about Rs 500 crore and translates into a value per share of close to about Rs 55-60. Hence, if you knock off the cash and the discounted value of the investment, core value of the business is ruling may be at about Rs 250 or so.

It is one of the cheapest fertilizer stocks and needs to catch up. This is a very good company and if somebody can keep a view of 12 months, he can expect a price target of Rs 500.

In the recent carnage this stock has not corrected. It has seen a correction of about only 5% in last one month, hence, it can move to about Rs 500 in next 12 months or so.