Rama Phosphates Limited - IMMEDIATE BUY !!

Business : Today I bring up a leading fertilizer player – RAMA PHOSPATES LIMITED. Started in Indore 25 years ago, RPL operates primarily in two areas a) Fertilizer and b) Edible oil. The Company, being one of the largest producer in its field, is engaged in manufacturing phosphatic fertilizers viz. Single Super Phosphate, Mixed fertilizers namely NPK and Chemicals like Sulphuric Acid, Oleum etc. RPL has its biggest markets across various states especially Gujarat, Rajasthan, MP, Karnataka, Maharashtra & Chhattisgarh under popular brand name of Girnar and Suryaphool. RPL has 3 major production units across the country:

1)     Indore Fertilizer Plant – capacity of 165000 MT of SSP & 102000 MT of Sulphuric acid

            Indore Oil division – 165000 MT of edible oil

2)     Pune Fertilizer Plant - 165000 MT of SSP and 81600 MT of Sulphuric Acid

3)     Udaipur Fertilizer Plant - 132000 MT of SSP

Icing on the cake, Rama Phosphates is currently on an expansion drive – it has obtained consent from Rajasthan State Pollution Control Board for enhancing its production Capacity of Single Super phosphates at its Udaipur Unit from existing 132000 MT per year to 181000 MT per year. The Company shall commence its enhanced approved production during current FY.

Financials : The company has posted a trailing EPS of 20.29 with a topline of 134 crores and Profit of 11.27 crores. The company continues to exhibit exponential growth declaring prolific June10 Q results – an EPS of 25.95 with bottom-line of 14.4 crores. Going forward, considering overall fertilizer sector boom, RPL expansion spree & special attention by Govt. of India to agriculture industry, this company seems heading for a forward annualized EPS of atleast 30 this FY. At current price of 77 Rs – you have only one option – to buy RPL which is available at a PE of less than 3. The stock is a IMMEDIATE BUY!!

Positives – The company has a strong SHP which ranged between 45% to 41% in last 8 years – sound record.

-        Paid up equity capital has not increased in last 2 years.

Negatives – There are few strong competitors in the organized sector.

Conclusion : The stock is already on a run and has reached 75-82 levels. Time to HURRY UP J to buy RAMA PHOSPATES LIMITED at current levels before DII start increasing their stake. Beyond doubt, this stock has the potential to double/triple in next 8 months duration visualizing an EPS of 30+ this FY. On a serious note, if no manipulation is happening inside the company as can be felt with sound SHP, the stock is a long term hold and I can foresee surprise jump in stock price in a year time.