Accumulate Chambal Fertilisers Ltd For Target Rs522 By Elara Capital
Capex plans remains elusive
Chambal Fertilisers (CHMB IN) reported in-line results. EBITDA growth of 5.5% was led by the crop protection chemicals (CPC) business profitability. Urea volume was flat. Traded volume grew 38% YoY. There is a slight delay in technical ammonium nitrate (TAN) plant commencement from Q4FY26 to Q1FY27, which would be the growth driver from FY27. A concrete plan on capacity expansion beyond TAN looks elusive, in our view, despite the nearing deadline of December 2026, when additional incentives for CHMB’s G-3 urea plan expires. Uncertainty over revised normalized return parameters for G3 plant persists. We retain Accumulate with a lower TP of INR 522 based on 11x FY28E EPS of INR 47.5.
TAN plant execution nearing completion: The 240,000-tonne TAN project is delayed by a quarter, with overall completion at ~92.7% as on Q3FY26. Total project cost stands at INR 16.4bn, of which ~INR 11.8bn has been incurred until Q3FY26. Engineering and procurement activities are largely complete at 99.86% and 99.80%, respectively, while construction to the extent of ~88% has been completed. The plant is set to be commissioned from Q1FY27. Precommissioning activities commenced in February, with trial runs at the cusp, and endproduct rollout is targeted by April 2026. Management plans to explore vertical and horizontal expansion opportunities in TAN.
Flat urea volume; subsidy dues accumulate: Urea volume in Q3FY26 remains flat YoY, with the slight impact due to a three-day unscheduled stoppage at the Gadepan I plant. The Gadepan II plant is scheduled for a planned maintenance shutdown of ~30-35 days in Q4FY26, which may weigh on near-term production. On the subsidy front, receipts during the quarter improved by 16% YoY. However, subsidy receivables increased 7x to INR 19.8bn vs INR 2.9bn in Q3FY25.
Launches new products; pipeline remains strong: CHMB continues to expand its non-urea portfolio during Q3FY26 with the launch of five new products in the CPC and specialty nutrients (SN) segments, spanning bio-pesticides, bio-fungicides and insecticides. The company introduced a research variety of wheat seeds in Q3, which has received encouraging initial response. The pipeline remains robust with 12 new CPC products and one SN product planned for launch in FY27, alongside new biological products for fungicides and nematicide.
Retain Accumulate with a lower TP of INR 522: Fertilizers, which is a large part of the current business, is on a solid footing, in our view, but lacks growth drivers. Management is focused on growing non-fertilizer business through many initiatives, which will start to bear fruit from FY27, starting with commercialization of the TAN plant. Despite these growth drivers, the potential EBITDA erosion due to expiry of benefits for CHMB’s G-3 urea plant in FY28 would outweigh gains from other businesses. We lower our EBITDA estimates by ~4-6% and PAT estimates 2-4% during FY26-28. We arrive at a lower TP of INR 522 from INR 544 based on 11x (unchanged) FY28E EPS of INR 47.5.
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SEBI Registration number is INH000000933
