GSFC soars 15% as Q1 profit more-than-doubles; stock up 39% from June low

Shares of Gujarat State Fertilizers & Chemicals (GSFC) soared 15 per cent to Rs 163.80 on the BSE in Friday’s intraday trade, on the back of heavy volumes after the company reported strong June quarter results (Q1FY23), with consolidated net profit more-than-doubled at Rs 345.81 crore, supported by healthy operational income.

The fertilizer company had reported net profit of Rs 136.11 crore in a year ago quarter (Q1FY22).  On quarter on quarter (QoQ) basis, net profit grew 21 per cent from Rs 286 crore in Q4FY22. The company’s revenue from operations jumped 63 per cent YoY and 48 per cent QoQ at Rs 3,018 crore.

At 10:54 AM, GSFC traded 14 per cent higher at Rs 162.10, as compared to 0.09 per cent gain in the S&P BSE Sensex. The trading volumes on the counter rose over eight-fold today. A combined 16.7 million equity shares representing 4.2 per cent of total equity of GSFC changed hands on the NSE and BSE.

The stock has recovered 39 per cent from its recent low of Rs 117.75 touched on June 20, 2022. The stock had hit a 52-week high of Rs 198.70 on April 5, 2022.

Meanwhile, the agriculture sector has experienced stable growth in the past two years compared to the other sectors of the economy. Normal monsoons and improved reservoir levels, higher coverage under assured irrigation, remunerative crop prices, export focus, favourable Government policies including fertiliser subsidy, record procurement under MSP, and push towards new products and technologies have been the key growth drivers for the agriculture sector.

However, the fertiliser industry consumption dropped by 5 per cent to 63 million tons amidst a higher base in 2021-22. Overall, the consumption growth has been in line with the prior years, with 2020-21 being an exception due to the regularisation of DBT related sales.

The fertiliser availability during the year was impacted by the elevated costs of manufactured and imported products, conflicting demand from key fertiliser consuming markets and supply challenges from the major sources. Further, the three consecutive years of normal monsoons resulted in lower opening stocks. The Government’s proactive approach and close coordination with the industry ensured its timely access to the farmers.

Going forward, higher agri commodity prices, Government agriculture focus, the expectation of a normal monsoon and higher reservoir levels bodes well for agriculture.

Technical View

Bias: Positive

Support: Rs 153.50

Resistance: Rs 188

Desite the sharp fall of near 35 per cent in June 2022, the stock managed to hold its positive bias firmly on the weekly chart. During the sharp corrective move, the stock touched the lower-end of the Bollinger Band on the weekly chart at Rs 115-odd level, and then pulled back.

In fact, with today's sharp rally the stock is seen firmly trading above its 20-WMA placed at Rs 153.50, after a gap of five weeks. The near term bias for the stock is likely to remain bullish as long as the stock trades above the 20-WMA.

On the upside, the stock can rally to Rs 188-odd level, indicates the weekly Bollinger Band. this level.

(Inputs from Rex Cano)