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Full backward integration by FY29

Paradeep Phosphates (PPL) reported consolidated revenue of INR61bn in Q1FY27, up 36% YoY, driven by 4% volume growth and price hikes across its NPK portfolio. EBITDA/tn improved to INR7,311 from INR6,171 in Q1FY26, supported by strategic raw material sourcing and efficient inventory management. Management highlighted that geopolitical tensions in West Asia are disrupting key shipping routes, resulting in higher freight costs and supply chain uncertainties. Consequently, raw material costs are expected to remain elevated in Q2FY27, which may weigh on margins if addition subsidy support from government is not received. On the growth front, the company is progressing with its 1mmtpa granulation capacity expansion and debottlenecking initiatives at the Paradeep plant, which are expected to support higher volumes from H2FY27 onwards. In addition, PPL has announced a capex of INR2.5bn to establish a 15ktpa Ammonium Fluoride plant, expected to be commissioned over the next 24 months. The company also remains on track to double its phosphoric acid capacity to 1mmtpa by early FY29 (from 0.5mmtpa currently, increasing to 0.7mmtpa in FY27), enabling full backward integration.

While elevated raw material costs may exert near-term pressure on margins, we believe PPL's increasing backward integration, ongoing capacity expansion, and scale benefits will support sustained earnings growth over the medium term. At the current market price, the stock trades at ~12x FY28E EPS. We value the company at 13x FY28E EPS, implying a target price of INR158, and maintain our 'Accumulate' rating

Revenue increases by 36%YoY/30.2%QoQ: Consolidated net revenue stood at INR61bn (36% YoY/ 30.2% QoQ) (PLe: INR53.2bn, Consensus: INR49.1bn), actual revenue came higher than our estimates., driven by higher volumes, with total fertilizer sales volume increasing 4.7% vs Q1FY26. Gross margin decreased to 27.0% in Q1FY27 from 31.6% in Q1FY26 (vs. 28.1% in Q4FY26). Gross profit increased 16% YoY and 25% QoQ to Rs16.5bn, primarily driven by higher changes in inventories and WIP

EBITDA increases by 24%YoY/63% QoQ: EBITDA came in at INR7.2bn (24% YoY/ 63% QoQ), (PLe: INR4.3bn, Consensus: INR4.5 bn). EBITDAM stood at 11.8% (PLe:8.1%) as against a margin of12.9% in Q1FY26 and 9.4% in Q4FY26, increasing by 240bps. Reported PAT was INR3,925 mn (24% YoY/ 152% QoQ), while margin came at 6% vs7% & 3% in Q1FY26 & Q4FY26, respectively.

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