Line of Business
GNFC is a state owned fertilizer and chemical company. It's revenues are 70% from chemicals and rest 30% from fertilizers. Chemical catalogue consists of multiple products like weak nitric acid, acetic acid, TDI etc. It is also the only manufacturer of TDI in SEA.[sup]\[/sup]1])
Financials
Company is generating consistent net profits of rs. 100 crores plus for every quarter since September 2017. Trailing 12 month profits stands at rs 1039 crores. With an EPS of rs. 66.83 the P/E ratio stands at around 5. The company is also debt free so there's no debt servicing costs and the opportunity of future leveraging if the need be.[sup]\[/sup]2])
Credit Ratings
Crisil ranks GNFC commercial paper at A1+. The rating continues to reflect GNFC's market leadership and established regional presence in the industrial chemicals and fertiliser (urea and ammonium nitro phosphate [ANP]) businesses, respectively. The ratings also factor in strong financial risk profile marked by comfortable debt metrics, healthy capital structure in absence of long term debt and ample liquidity, supported by unutilised bank limits. These strengths are partially offset by risks related to price volatility in the chemicals, primarily toluene di-isocyanate (TDI) business, and exposure to risks related to regulated nature of the fertiliser business. CRISIL will continue to monitor sustainability of operations and profitability of the company's TDI plant, the company's overall performance in the fertiliser segment, and any higher than expected debt-funded capital expenditure (capex), which may adversely impact its financial risk profile.[sup]\[/sup]3])
Valuation
This has been tricky. The company is predominantly involved in chemicals but the peer comparison available on the internet is mostly against fertilizer companies. This isn't an apples to apples comparison but this is the best I have right now. The P/E and EPS comparison in one of the peer group comparison shows GNFC to have the lowest P/E with highest EPS and profits.[4] However, these companies will have very different product portfolie so I am not sure how good the valuations compare. But nonetheless the P/E of 5 seems to reflect the stock is at a discount imo.
Is someone else following this stock? What are your opinions on this one?
GNFC is a state owned fertilizer and chemical company. It's revenues are 70% from chemicals and rest 30% from fertilizers. Chemical catalogue consists of multiple products like weak nitric acid, acetic acid, TDI etc. It is also the only manufacturer of TDI in SEA.[sup]\[/sup]1])
Financials
Company is generating consistent net profits of rs. 100 crores plus for every quarter since September 2017. Trailing 12 month profits stands at rs 1039 crores. With an EPS of rs. 66.83 the P/E ratio stands at around 5. The company is also debt free so there's no debt servicing costs and the opportunity of future leveraging if the need be.[sup]\[/sup]2])
Credit Ratings
Crisil ranks GNFC commercial paper at A1+. The rating continues to reflect GNFC's market leadership and established regional presence in the industrial chemicals and fertiliser (urea and ammonium nitro phosphate [ANP]) businesses, respectively. The ratings also factor in strong financial risk profile marked by comfortable debt metrics, healthy capital structure in absence of long term debt and ample liquidity, supported by unutilised bank limits. These strengths are partially offset by risks related to price volatility in the chemicals, primarily toluene di-isocyanate (TDI) business, and exposure to risks related to regulated nature of the fertiliser business. CRISIL will continue to monitor sustainability of operations and profitability of the company's TDI plant, the company's overall performance in the fertiliser segment, and any higher than expected debt-funded capital expenditure (capex), which may adversely impact its financial risk profile.[sup]\[/sup]3])
Valuation
This has been tricky. The company is predominantly involved in chemicals but the peer comparison available on the internet is mostly against fertilizer companies. This isn't an apples to apples comparison but this is the best I have right now. The P/E and EPS comparison in one of the peer group comparison shows GNFC to have the lowest P/E with highest EPS and profits.[4] However, these companies will have very different product portfolie so I am not sure how good the valuations compare. But nonetheless the P/E of 5 seems to reflect the stock is at a discount imo.
Is someone else following this stock? What are your opinions on this one?