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Tuesday, January 24, 2012

Zuari Industries Ltd:-Buy/sell/growth prospects and recommendation,news and results,target and analysis,view and outlook,multibagger

Scripscan:Zuari Industries Ltd

Story:Recently, Zuari, in joint venture with Mitsubishi Corporation, acquired a 30% stake in Peruvian mine Fospac for 230 crore for assured supply of phosphate rock- the main feedstock for di-ammonium phosphate (DAP). Fospac?s annual rock phosphate production is expected to reach 2.5 million tonne by 2015, half of which will come to Zuari. The company plans to set up a 1 million tonne DAP plant at Karwar in Karnataka with a capex of 750 crore.In mid August 2011 the company finalised a contract to source potash feed, which will help the company grow its revenue and profit.Recently, Zuari also signed a gas-supply agreement with GAIL for 0.4 million tonnes urea plant at Zuarinagar. With fuel supply expected to start from January 2012, the company?s annual urea production capacity will grow 10% to 441000 tonnes. This is likely to attract an additional margin of 3,000 a tonne, which means an additional profit of 12.6 crore.The company also has plans to set up 1.3 million tonne gasbased urea plant at Belgaum in Karnataka at a cost of 5,000 crore by 2015-16. The Dabhol-Bangalore gas pipeline project may supply the project with natural gasDuring the first half of FY12, Zuari's performance was impacted by a 63-day long disruption in urea production and a 20-day break in phosphatic and potassic fertiliser production during the September 2011 quarter following a fire accident.These led to a 15% fall in the total sales volume of the company to 0.94 million tonnes compared with a year-ago period. Consequently, Zuari?s top-line also fell 1.2% to 2,995 crore on a standalone basis and bottomline dropped 27% to 80 crore. Operating profit margins were down 130 basis points to 3.3%. Zuari could complete only 40% of its annual target of 0.4 million tonne of urea production during the first half due to plant shutdown. The company expects to make up for the shortfall in the remaining two quarters. Also, as on September 30, 2011, the company had a builtup inventory of over 1,300 crore which is expected to liquidate with the resumption of operation at the plants.At the current market price of 430, the stock trades at nearly nine times its earnings for the trailing 12 months. Industry rivals such as Coromandel International and Gujarat State Fertilizes Corporation are currentlytrading at 11 and 4.1, respectively.

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