GNFC - Rs.71.50

Gujarat Narmada Valley and Fertilizer Co (GNFC) was promoted by the Government of Gujarat and Gujarat State Fertilisers Corporation in 1976 to manufacture chemical fertilisers, particularly ammonia, urea and petrochemicals. Since then, it has emerged as one of the largest players in fertilizer & chemicals producing various products in technical collaboration with leading MNCs from around the world. It’s also getting a foothold to become a significant player in the IT infrastructure and infotech solutions provider.

GNFC can boast of having the world's largest single stream fuel oil based Ammonia-urea plant. Besides, it is India's largest producer of Formic Acid, Acetic Acid and Methanol. It’s also India's only producer of Glacial Acetic Acid through the cutting-edge Methanol route using British Petroleum Technology. In short, GNFC is the most efficient and well-managed company working at more than 100% capacity utilization. Due to the untrend and strong growth in consuming sectors like Textiles, Paper, Insecticides, Pesticides, Food processing etc. the demand for GNFC’s products will continue to grow at a respectable rate. GNFC is also planning to shift to natural gas as the feed-stock so as to rationalize the cost structure and enjoy the benefit of the new fertilizer policy. Moreover, the company also has long term plans to double its methanol and acetic acid production capacity so as to become a globally competitive player.

Incidentally, GNFC has maintained an uninterrupted record of rewarding shareholders by dividends for the last 20 years. For FY05 also, it is expected to declare atleast 35% dividend by Sept 2005, which means an dividend yield of 5% at CMP. For the nine months ending 31st Dec 2004, its total revenue was up 18% to Rs.1282 cr. but its NP increased by 60% to Rs.131 cr. due to better operating margins and lower interest cost. For the full year, it may report Sales of Rs.1850 cr. and NP of Rs.175 cr. leading to an EPS of around Rs.12 Of late, fertlizer scrips have caught market fancy and if the monsoon is good this fiscal, then the share prices of these companies can shoot up substantially. For FY06, it can report an EPS of Rs.14 on its current equity. Investors are recommended to buy at current levels with a price target of Rs.100 in 12~15 months