Fertiliser, agrochemical shares in focus; Zuari Agro up 25% in 2 days

UPL, Zuari Agro, Chambal Fertilisers, FACT and GSFC trading at 52-week highs on the BSE.

Shares of fertiliser and agrochemical companies were in focus with UPL, Shivalik Rasayan, Zuari Agro Chemicals, Chambal Fertilisers & Chemicals, Fertilizers & Chemicals Travancore (FACT) and Gujarat State Fertilizers & Chemicals (GSFC) trading at their respective 52-week highs on the BSE.

Zuari Agro Chemicals, Zuari Global, Nagarjuna Fertiliser, Mangalore Chemicals & Fertiliser, Madras Fertilizers, Deepak Fertilizers & Petrochemicals and Chambal Fertilisers & Chemicals from the fertiliser were up between 3% and 5% on the BSE. UPL, PI Industries, Nagarjuna Agrichem and Bhagiradha Chemicals & Industries from the agro chemical sector were up in the range of 1% to 10%.

Zuari Agro Chemicals has moved higher to its 52-week high of Rs 337, up 20% on the BSE in intra-day trade, extending its Wednesday rally on back of heavy volumes.

In past two trading sessions, the stock of Fertiliser Company zoomed 29% from Rs 261 on January 17, 2017.

The trading volumes on the counter jumped more than three-fold with a combined 917,691 equity shares representing 2.2% of total equity of the company changed hands on the NSE and BSE till 12:59 pm.

On December 23, 2016 Coltrane Corporation Limited, one of the promoter had sold 479,750 shares of Zuari Agro Chemicals at Rs 226.50 per share on the BSE. However, Globalware Trading And Holdings Limited, the another promoter, bought 479,750 shares at Rs 226.50 per share on the BSE.

According to Edelweiss Securities, the fertilizers sector was hit by multiple headwinds in past few quarters such as erratic monsoon, raw material availability issues and depreciation of INR.

“We expect reversal of the downturn cycle and recovery in profitability over next 12?18 months, primarily on liquidation of excessive channel inventory and improved capacity utilization,” the brokerage firm said in earning preview.

“India’s agrochemicals sector, riding on its inherent structural drivers and strong entry barriers, is set to grow at a 12% CAGR over FY16-FY19E. Besides, products worth US$ 6.3 billion would go off-patent by 2020, offering an attractive opportunity for generic players,” said Religare Institutional Research in sector update.

While stricter regulations could cap return ratios, we are fundamentally positive on the sector and like Dhanuka Agritech for its improving product mix, UPL for its diversified presence and Rallis India for its improving business traction, added report.