fertiliser companies: Fertiliser companies to get a volume+pricing boost

ET Intelligence Group: Shares of fertiliser makers such as Deepak Fertilisers, Chambal Fertilisers, Coromandel International and Paradeep Phosphates have gained 10-31% in a month amid volatile market conditions. The fertiliser sector is expected to deliver a strong March 2025 quarter performance supported by robust volume growth, price increase, and subsidy-linked gains. Coromandel stands out with stellar earnings and a strategic entry into agrochemicals after acquiring NACL in March.

While agrochemical demand remains subdued due to unfavourable weather conditions and crop price pressures, fertilizers are benefiting from structural advantages, making them the preferred pick.

According to a report by Elara Securities, at the sector level, fertiliser volumes rose by 5% year-on-year to 1.6 million tonnes as of March 17, driven by a 26% jump in complex fertilisers. Prices for popular NPK grades such as 10-26-26 and 12-32-16 have been raised by 6-10%. The brokerage expects Coromandel International to report 92% increase in the operating profit before depreciation and amortisation (Ebitda) for the fourth quarter, owing to a 150% surge in the subsidy-linked business.

The company has been scaling up capacity for phosphoric and sulphuric acid, with commercial rollout expected by March next year. In the December 2024 quarter, Coromandel delivered a 102% jump in Ebitda and a 123% spike in net profit, driven by strong sales of DAP (diammonium phosphate), complex fertilisers.

On March 12, Coromandel announced the acquisition of 53.1% stake in Hyderabad-based agrochemical company, NACL Industries. The ₹820-crore deal will help Coromandel to expand product pipeline and market reach in the technical manufacturing and formulation business. NACL clocked ₹1,787 crore in consolidated revenue in FY24. Chambal Fertilisers is forecast to report a healthy 75% Ebitda jump this quarter, while Paradeep Phosphates may post an 86% gain, driven by scale and efficiency gains.

According to the ministry of agriculture and farmers welfare, the rabi sowing is expected to hit a three-year high at 196.5 million hectares for FY25, up by 1.7% year-on-year. This augurs well for fertiliser companies. The extent of monsoon will play a crucial role in deciding demand for FY26.Structurally, fertiliser companies like Coromandel and Paradeep Phosphates are preferred by Elara Securities over agrochemicals due to import substitution benefits. The fertiliser sector is insulated from US tariffs and China has limited presence due to high-entry barriers. At the aggregate level, brokerage expects Chambal Fertilisers, Coromandel and Paradeep Phosphates to post 135% year-on-year surge in net profit for the March 2025 quarter.