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Top 5 Fertilizer Companies in India by Growth

Jan 24, 2023

Top 5 Fertilizer Companies in India by Growth

Can you imagine going on with your day without food?

I agree that some can stay without food for a day or two, or there are people who go on fasting for months. But most of us need food daily, at least three times a day.

In the world's most populous country (now that India has surpassed China), with a population of over 1.4 billion (bn) people, we need to have enough food production.

To achieve this, using fertilizers for higher productivity and yield is mandatory.

Until we find out a way to live without food, fertilizers will be in use.

Moreover, Russia, a major fertilizer exporter, and its ongoing war with Ukraine, threatened the global supply of fertilizers, paving the way for other countries to fill the gap.

There's more. With the Union Budget 2023 fast approaching in less than two weeks, word on the street is that the government might give a subsidy on urea, providing a very positive outlook for the fertilizer sector stocks.

That is why you need to closely track the fertilizer industry now more than ever. The sector is poised for structural growth, led by a renewed emphasis towards food security due to shortages amid the global supply chain recovery.

Here are five fertilizer companies in India which score well on growth parameters.

#1 Coromandel International

First on the list is Coromandel International.

Part of the Murugappa Group, Coromandel has a presence across various industries, including auto components, abrasives, financial services, sugar, and farm inputs.

Coromandel International is one of the leading agri solutions providers in India. It has a diverse range of products and services and specializes in fertilizers, crop protein, bio-pesticide, and organic fertilizers.

It has a strong distribution network of 20,000 dealers and over 2,000 market development teams. This is the reason why it enjoys market leadership in phosphatic fertilizer and super phosphate space with around 17.9% market share as of September 2022.

In the last five years, the company's revenue has grown at a compound annual growth rate (CAGR) of 11.6%, driven by volumes due to its strong retail presence with over 750 outlets.

The net profit has seen a 17.1% growth on CAGR basis due to the captive production of phosphoric acid, a key input, and established relationships with the suppliers.

Coromandel International Financial Snapshot (2018-2022)

Particulars (Rs m) FY18 FY19 FY20 FY21 FY22
Total Revenue 110,985 132,616 131,767 142,570 192,551
Growth   19.5% -0.6% 8.2% 35.1%
Operating Profit 12,564 14,192 17,310 19,842 21,499
Operating Profit Margin 11.4% 10.7% 13.2% 14% 11.2%
Net Profit 6,919 7,196 10,643 13,238 15,247
Net Profit Margin 6.3% 5.4% 8.1% 9.3% 8%
Source: Equitymaster

In financial year 2022, the company successfully completed a backward integration by acquiring a rock phosphate mining company in Africa. This acquisition will ensure a long-term supply of one of the key inputs and drive profitability.

Coromandel International incurred a capex of Rs 2.8 billion (bn) in 2022 and plans to spend around Rs 9 bn for the financial years 2023 and 2024. Despite such heavy capex, it plans to retain its debt-free status.

Its seven state-of-the-art research and development (R&D) centres focusing on continuous innovation have helped the company launch nine new products in 2022.

New product launches coupled with a good monsoon drove revenue growth in the September 2022 quarter. The revenue grew by 64.5% year-on-year (YoY), and the net profit grew by 41% YoY.

To further strengthen its presence in agri-tech, the company invested in a drone-based startup to launch the first of a kind 'drone-as-a-service'.

All these reflect the company's efforts to become the largest player in the fertilizer industry.

Changing dietary preferences, continued government support, and technological advancements will drive the company's growth in the medium term.

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To know more about Coromandel International, checkout its factsheet and latest quarterly results.

#2 Chambal Fertilizers and Chemicals

Second on the list is Chambal Fertilizers and Chemicals.

The company is engaged in the business of urea, an important fertilizer and feed supplement used in the agriculture sector.

It is the largest private player in manufacturing urea, with an installed capacity of 3.4 million tonnes per annum (MTPA).

Apart from urea, it also markets other fertilizers, including di-ammonium Phosphate (DAP), muriate of potash (MOP), speciality plant nutrients and crop protection chemicals.

In the last five years, the company's revenue has grown at a CAGR of 15.8%, driven by volumes across all segments. The net profit also grew by 22.5% CAGR due to high operating efficiency at the manufacturing plants.

To add to this, it managed to reduce its debt significantly. The current debt-to-equity ratio is 0.4x, as against 1.4x five years ago, and the interest coverage ratio also improved from 5.4x to 16.3x.

Chambal Fertilizers and Chemicals Financial Snapshot (2018-2022)

Particulars (Rs m) FY18 FY19 FY20 FY21 FY22
Total Revenue 77,460 102,847 123,941 127,788 161,535
Growth   32.8% 20.5% 3.1% 26.4%
Operating Profit 8,108 10,116 20,320 28,028 22,651
Operating Profit Margin 10.7% 9.9% 16.5% 22% 14.1%
Net Profit 4,562 4,682 12,226 16,581 12,597
Net Profit Margin 6% 4.6% 10% 13% 7.8%
Source: Equitymaster

In financial year 2022, the government allowed the company to ramp up production at its Gadepan-III plant, which operated at more than 100% of capacity.

This resulted in higher sales, with a growth of 93% YoY in the September 2022 quarter.

However, its profitability was reduced due to increased fertilizer input prices, leading to a decent correction in its share price.

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In line with the government's Atmanirbhar initiative to domestically manufacture technical ammonium nitrate (TAN), the company is increasing its TAN production by 20,000 MTPA. This will boost the company's revenue in the medium term.

Going forward, the company's energy-efficient plants, its competitive edge over imported urea, and government subsidies will drive its profitability.

To know more about Chambal Fertilizers and Chemicals, checkout its factsheet and latest quarterly results.

#3 Gujarat State Fertilizers & Chemicals (GSFC)

Next on the list is Gujarat State Fertilizer and Chemicals (GSFC).

Promoted by the Government of Gujarat, GSFC is in the manufacturing and trading of fertilizers and industrial chemicals.

It has a diversified product portfolio which it manufactures in four state-of-the-art manufacturing plants located in Gujarat.

Additionally, it also manufactures several other products that are otherwise imported from abroad.

In the last five years, the company's revenue has grown at a CAGR of 7.9%, driven by improvement across all its business segments. The net profit also grew at a CAGR of 13.7% on the back of its backward integration efforts.

As a result, its return on equity (ROE) has improved to 7.6% from 1.6% three years ago. The RoCE also grew to 11.3% in the financial year 2022 from 3.6%.

Gujarat State Fertilizers & Chemicals Financial Snapshot (2018-2022)

Particulars (Rs m) FY18 FY19 FY20 FY21 FY22
Total Revenue 63,261 85,982 79,045 78,172 92,659
Growth   35.9% -8.1% -1.1% 18.5%
Operating Profit 5,648 7,487 3,172 5,720 13,205
Operating Profit Margin 9.1% 8.8% 4.1% 7.5% 14.5%
Net Profit 4,738 4,931 1,067 4,501 8,986
Net Profit Margin 7.6% 5.8% 1.4% 5.9% 9.9%
Source: Equitymaster

In financial year 2022, it bought a 15% stake in a firm producing phosphate to secure a steady supply of phosphoric acid. This helped the company secure an important input at a bargain price.

GSFC also invested in a Canada-based company to add potassium to its portfolio and increase its market share in nitrogen phosphorous potassium (NPK) fertilizers.

Further, the company also announced several modular-size capex projects worth Rs 7.7 bn, including an ammonium sulphate plant, an HX crystal project, a solar power project, and revamping its urea plant at Vadodara to its production capacity.

All the projects will be funded through internal accruals and surplus liquidity which will help the company maintain its debt-free status.

It also plans to set up a green hydrogen plant in its Vadodara plant to support the government's green initiatives.

New product launches and the company's new initiatives in green hydrogen space are expected to drive its revenue in the medium term.

chart

To know more about Gujarat State Fertilizers and Chemicals, checkout its factsheet and latest quarterly results.

#4 Khaitan Chemicals & Fertilizers

Fourth on the list is Khaitan Chemicals and Fertilizers.

The company manufactures single super phosphate fertilizers, sulphuric acid and its variants.

Being a leading producer of single super phosphate with a capacity of 1.13 MTPA, it has a market share of 9% in India as of March 2022.

The company also has a strong distribution network of over 3,000 distributors across India.

In the last five years, its revenue has grown at a CAGR of 18.5%, driven by healthy product demand. The net profit also saw a healthy growth of 118.8% on the back of better capacity utilization.

The RoE improved significantly from 1.3% five years ago to 31.8% in the financial year 2022. Its RoCE also grew to 44.6% from 16.7% during the same time.

Khaitan Chemicals & Fertilizers Financial Snapshot (2018-2022)

Particulars (Rs m) FY18 FY19 FY20 FY21 FY22
Total Revenue 3,531 3,734 4,394 4,814 8,250
Growth   5.7% 17.7% 9.6% 71.4%
Operating Profit 361 428 462 614 1,217
Operating Profit Margin 10.3% 11.5% 10.6% 12.8% 14.8%
Net Profit 16 79 151 269 802
Net Profit Margin 5% 2.1% 3.5% 5.6% 9.7%
Source: Equitymaster

In financial year 2022, the company paid off its debt and became a debt free company.

In the September 2022 quarter, Khaitan's revenue grew by 29% YoY. It reported a net profit of Rs 171 m compared to Rs 283 m in the year ago quarter.

Currently trading below Rs 100, the company is focussing on producing more value-added products to improve its product portfolio and diversify into new geographical markets.

Going forward, its improving performance and growth plans are expected to drive its revenue.

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To know more about Khaitan Chemicals and Fertilizers, checkout its factsheet and latest quarterly results.

#5 Shree Pushkar Chemicals & Fertilizers

Last on the list is Shree Pushkar Chemicals and Fertilizers.

Incorporated in 1993, the company manufactured dyes and its intermediaries. Over the years, it moved up the value chain and started manufacturing acids and fertilizers.

Currently, it has over 25 products in its portfolio manufactured in five plants across India.

In the last five years, its revenue has grown at a CAGR of 8.3%, driven by growth in volumes and realization. The net profit also grew by a CAGR of 8.7% on the back of higher capacity utilization.

Its RoE and RoCE stood at 14.2% and 18.2%, respectively, at the end of the financial year 2022.

Shree Pushkar Chemicals Financial Snapshot (2018-2022)

Particulars (Rs m) FY18 FY19 FY20 FY21 FY22
Total Revenue 3,971 4,546 3,506 3,617 5,914
Growth   14.5% -22.9% 3.2% 63.5%
Operating Profit 611 668 493 432 795
Operating Profit Margin 15.4% 14.8% 14.2% 12.2% 13.6%
Net Profit 365 408 357 285 555
Net Profit Margin 9.2% 9% 10.3% 8% 9.5%
Source: Equitymaster

Shree Pushkar Chemicals and Fertilizers is undertaking several capex projects worth Rs 1.7 bn for the next two years starting 2022.

It spent Rs 1.1 bn on expanding its capacity from 426 thousand MTPA to 590 thousand MTPA.

The company also completed a solar project of 4 megawatts (MW) for captive use.

All the capex is funded entirely through internal accruals and cash surplus, helping the company retain its debt-free status.

In the December 2022 quarter, the company's revenue grew by 12.2%, driven by volume growth. However, high input prices drove the profit down.

This affected its performance on the bourses.

chart

The company plans to focus on backward integration so that it can produce raw materials internally to improve its cost efficiency and profitability.

Capacity expansion is expected to drive its revenue and profitability in the medium term.

To know more about Shree Pushkar Chemicals and Fertilizers, checkout its factsheet and latest quarterly results.

Why should you include fertilizer stocks in your portfolio?

In summary, with a rising population, increasing demand for food, and favorable weather conditions, investing in the fertilizer sector can be a strategic move for India to ensure food security and support the growth of its agriculture industry.

Also, fertilizer stocks should be tracked ahead of the Union budget 2023 because government policies and announcements related to the sector can have a significant impact on the performance of these stocks.

However, one must note that fertilizer stocks are not immune to risks. You must carefully analyse these stocks before you consider investing in them.

Look for companies using technology to improve their efficiency. Only companies that are continuously innovating stand a chance in this highly competitive space.

Apart from this, check the company's fundamentals and valuations. A fundamentally strong company has the potential to give good returns in the long term.

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Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...

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