4 best-performing fertiliser stocks

Imagine a crop season without fertilisers. Will you get good seasonal fruits, vegetables, grains, and so on? Yes, everyone will get them, but the quality and quantity may be hampered without fertilisers. Fertilisers are vital elements in the agriculture process. Not only this, but they could also lead to food shortages and higher prices.

Additionally, without fertilisers, farmers may require more land for farming, resulting in the cutting of trees and leading to deforestation, which eventually has negative environmental impacts. Although we don’t use them directly daily, their absence would drastically affect our daily lives.

In this article, we are going to explore the three best fertilizer stocks we have come across based on the criteria mentioned below. For filtering stocks, we have used some metrics like good CAGR, sales, and profit growth over the past three years, ROCE and ROE should be above 20%, and debt-to-equity should be below 1.5 times. Let’s explore each stock.

1. Fertilisers & Chemicals Travancore Limited

   Fertilizers & Chemicals Travancore Limited (FACT), incorporated in the year 1943, is the first large-scale fertiliser plant in India located in Kerala. The company is engaged in the manufacturing and selling of fertilisers, their by-products, and Caprolactam. It operates under the administrative control of the Department of Fertilisers, Ministry of Chemicals & Fertilisers, Government of India.
   The current market capitalisation of the company stands at Rs 45,919 crore, and the company’s stock is available at Rs 709.65 per share on the BSE. Additionally, the stock has delivered an impressive multibagger return of 182% in the past one year.
   Looking at the CAGR growth of Sales and Profit, the compounded sales growth in the last three years is 30.80%, while profit has grown by 459%. The company’s ROCE and ROE are at 30.34% and 62.46%, respectively. Currently, the stock is trading at a higher PE multiple of 106 times in the market. While the debt-to-equity ratio stands at 1.29 times.

2. Rashtriya Chemicals & Fertilisers

   Rashtriya Chemicals & Fertilizers is a public sector undertaking with a 75% stake owned by the Government of India. The company is engaged in the manufacturing and marketing of fertilisers and industrial chemicals.
   The current market capitalisation of the company stands at Rs 7,762 crore, and the company’s stock is available at Rs 140.70 per share on the BSE. Additionally, the shares have delivered an impressive return of 36% in the past one year.
   Looking at the CAGR growth of Sales and Profit, the compounded sales growth in the last three years is 30.29%, while profit has grown by 48.56%. The company’s ROCE and ROE are at 21.20% and 21.10%, respectively. Currently, the stock is trading at a PE multiple of 40 times in the market. While the debt-to-equity ratio stands at 0.49 times.

3. SPIC Limited

   Southern Petrochemicals Industries Corporation (SPIC) is engaged in the manufacturing and sale of urea and nitrogenous chemical fertilisers.
   The current market capitalisation of the company stands at Rs 1,720 crore, and the company’s stock is available at Rs 84.46 per share on the BSE. Additionally, this stock has delivered an impressive return of 35% in the past one year.
   Looking at the CAGR growth of Sales and Profit, the compounded sales growth in the last three years is 10.81% (an exception to our condition, but other criteria are still fulfilled), while profit has grown by 65%. The company’s ROCE and ROE are at 29.58% and 35.86%, respectively. Currently, the stock is trading at a PE multiple of 10.58 times in the market, while the debt-to-equity ratio stands at 0.50 times.

4. Madhya Bharat Agro Products Limited

   Madhya Bharat Agro Products Limited, a part of the Ostwal Group, is engaged in the business of manufacturing fertilizers and chemical products.
   The current market capitalisation of the company stands at Rs 2,436 crore, and the company’s stock is available at Rs 278 per share on the NSE. However, the stock has given a negative return of 12% in the past year.
   Looking at the CAGR growth of Sales and Profit, the compounded sales growth in the last three years is 96.70%, while profit has grown by 103%. The company’s ROCE and ROE are at 37.80% and 46.55%, respectively. Currently, the stock is trading at a PE multiple of 52 times in the market. While the debt-to-equity ratio stands at 52 times.

Conclusion

India is an agricultural country, with around 60% of its population engaged in agriculture-related activities. The fertiliser industry in India plays a crucial role in boosting agricultural productivity and enhancing food security.

Considering its importance, one should definitely consider investing in fertiliser stocks. However, before investing, investors need to thoroughly analyse the business, management, financial performance, and other aspects of the company.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.