The Hindu Business Line : GSFC remains on firm ground thanks to expansion plans

The stock is ruling firm as it is reportedly exploring the viability of expansion in caprolactam, melamine, sulphuric and phosphoric acid. The company is understood to be looking at the viability of setting a methanol plant at Vadodara subject to availability of additional gas.

For supply of gas, it has long-term tie-ups with GSPC, Gujarat Gas and Gail.

GSFC has recently formed a JV with Coromandel Fertilizers and Groupe Chimiqe Tunisien of Tunisia for manufacturing phosphoric acid. Additional supply of phosphoric acid from this joint venture is expected to boost GSFC's sales by Rs 600 crore, according to Mr Milan Bavishi of Anagram Stockbroking.

According to analysts, the stock suffers from a common misconception that it is only a fertiliser player. "In reality, only 28.15 per cent of PBIT is contributed by fertiliser and the rest by caprolactam and other chemical items," Mr Rajesh Agarwal of CD Equisearch said.

According to him, a firm caprolactam price trend in the domestic and international markets is likely to continue in the future also considering strong demand from the automobile industry, the end-user. "At home, caprolactum is protected by anti-dumping duty and on the other hand, the country exports caprolactam to China," he added.

After debt restructuring and an elaborate cost reduction exercise, the profitability of GSFC has already increased. Its plant is said to be running at over 100 per cent capacity.

Analysts consider the stock as a strong value play. At today's closing price, the stock traded five times its expected earnings per share of Rs 30.7, Mr Bavishi observed.