Fertiliser shares extends rally; RCF, NFL, FACT, Deepak zoom up to 20%

Shares of fertiliser companies continued their northward movement for the second straight day, zooming up to 20 per cent on the BSE in Thursday’s intra-day trade backed by heavy volumes on expectations of a healthy outlook. In the past two trading days, fertiliser stocks have skyrocketed by up to 27 per cent. Most of the stocks were trading at their multi-year highs.

Fertilisers & Chemicals Travancore (FACT), Rashtriya Chemicals and Fertilizers (RCF), National Fertilizers (NFL), Deepak Fertilisers and Petrochemicals Corporation (DFPCL) and Paradeep Phosphates zoomed between 15 per cent and 20 per cent in intra-day trades today.

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While, Chambal Fertilisers and Chemicals, Gujarat State Fertilizers & Chemicals (GSFC), Coromandel International, Gujarat Narmada Valley Fertilizers & Chemicals (GNFC) and Zuari Industries were up in the range of 6 per cent to 14 per cent. In comparison, the BSE Sensex was up 0.35 per cent at 77,609 at 01:35 pm.

The Union Cabinet in its meeting held on Wednesday approved the Minimum Support Price (MSP) for upcoming kharif crops. The average increase on a year-on-year (YoY) basis is around 5-6 per cent which is broadly the usual trend. However, it is a tad higher for Pulses and Oilseeds given the government’s thrust on increasing their production domestically and reducing imports.

Meanwhile, India Ratings and Research (Ind-Ra) opines the credit profile of fertiliser players will remain comfortable in FY25, driven by the government of India’s (GoI) continued policy-level support to the industry by way of the healthy subsidy budget of Rs 1.64 trillion. This is backed by a moderation in the raw material prices across urea and nutrient-based fertilisers starting Q4FY23, coupled with the likelihood of a continued healthy demand in view of the GoI’s focus to increase farmer income.

Analysts expect better urea volume growth in FY25E, driven by expectations of onset of the La Nina phenomenon along with the monsoon, which should result in good rainfall.

India Meteorological Department (IMD) has forecasted above normal monsoon in FY25. This is the first time, after a gap of eight years, that the IMD has forecast “above normal” rains in the country, expecting a good kharif season this year.

Among individual stocks, RCF hit a new high of Rs 222.40, zooming 20 per cent on the BSE in today’s intra-day trade on the back of near 10-fold jump in average trading volumes. In the past two days, the stock rallied 28 per cent. A combined 129.32 million shares representing 23.4 per cent of total equity of RCF changed hands on the NSE and BSE.

Shares of Chambal Fertilisers too hit a new high of Rs 553.95, surging 18 per cent in intra-day trades and zoomed 26 per cent in two trading days. As many as a combined 47.32 million shares representing 11.8 per cent of total equity of the company changed hands on the NSE and BSE.

The management said the company is on track to achieve their FY26-27 numbers of Rs 300 crore + of EBITDA.  The company has a strong pipeline of 12 new products of crop protection chemicals (CPC) for FY25, with focus on Weedicides. The company has already launched four of these products in the month of April.

Shares of NFL hit a record high of Rs 151.05, as they rallied 20 per cent in intra-day trade on back of three-fold jump in average trading volumes. In the past two days, the stock surged 26 per cent.

NFL’s profitability of the trading segment in FY2025 hinges on the import price of the traded products and the revision in nutrient-based subsidy (NBS) rates for H2 FY2025. The stabilisation of urea operations across plants is likely to improve the profitability in the urea segment, going forward, according to ICRA.

The import dependence for urea remains in the range of 20-25 per cent, given the inadequate domestic capacity (this proportion is likely to decline with the commencement of operations of new urea units. With a significant price differential between urea and non-urea fertilisers, the demand for urea remains intact and is expected to grow at a stable rate of 1-3 per cent in the near to medium term although the growth/degrowth may move out of this range in a few years, the rating agency said in rationale.