GSFC rallies 40% in two days; more steam left, say brokers

MUMBAI: Fertiliser company Gujarat State Fertilizers & Chemicals ( GSFC) has surged nearly 40 per cent in just two sessions after the company held analysts meet.

According to analysts, some big investors have bought the stock after the meet. The stock has been available at discount to peers and hence some more upside can be expected in the stock.

“We expect GSFC’s valuations to catch up with other fertiliser peers. Given that valuations remain attractive as well as the fact that stock has underperformed in the current rally, we anticipate the valuation discount to narrow,” said Prabhudas Lilladher report.

According to the brokerage, the company is likely to benefit from its fertiliser business. The company hiked MRPs by 10-15 per cent from Apr 2014 in anticipation of a gas price hike.

“GSFC's fertiliser MRPs is still lower when compared to peers/ IPP linked prices, giving room for further price hikes. GSFC expects fertiliser business to deliver stable margins of Rs2,500/mt. Stable FX and lower discounts this year bode well for fertiliser margins,” said Balwindar Singh of Prabhudas Lilladher.

The brokerage expects GSFC’s EPS to be Rs 12.8/14.4 in FY15E/16E respectively. It has raised the stock’s target price to Rs 115 from Rs 90 earlier.

At 11:00 a.m.; the stock was at Rs 98.50, up 10.80 per cent. It rallied 17 per cent intraday to touch 52-week high of Rs 104.

It has surged 40 per cent in last two sessions to Rs 104 from closing price of Rs 74.10 on September 10.