Accumulate Paradeep Phosphates Ltd For Target Rs.141 by Prabhudas Liladhar Capital Ltd
Full backward integration by FY29
Paradeep Phosphates (PPL) reported consolidated revenue of Rs47bn in Q4FY26, up 12% YoY, however there was 10% YoY decrease in sales volumes. Gross margins expanded by 480bps, supported by strategic raw material sourcing and inventory management. Management indicated that inventory levels remain adequate for Q1FY27, though prolonged disruptions may pose sourcing challenges going forward. All existing capacities operated at full utilization during FY26. The company is undertaking 1mmtpa granulation capacity expansion and debottlenecking initiatives at its Paradeep plant, which are expected to drive volume growth from H2FY27 onwards. On the capex front, PPL increased its sulphuric acid capacity to 2mmtpa from 1.4mmtpa in FY26 and is on track to double phosphoric acid capacity to 1mmtpa by early FY29, enabling full backward integration upon completion.
While elevated raw material prices may exert near-term margin pressure, we believe the company’s integrated operations, scale expansion will support sustained earnings growth over the medium term. At CMP, PPL trades at ~10x FY28E EPS, we value the company at 11x FY28E EPS with a target price of Rs141 and maintain ‘Accumulate’ rating
Revenue increases by 12%YoY/-18%QoQ:
Consolidated net revenue stood at Rs47bn (+12% YoY / -18% QoQ) (PLe: Rs45.9bn; Consensus: Rs44.1bn), broadly in line with our estimates. FY26 revenue increased 29% YoY, driven by higher volumes, with total fertilizer sales volume increasing 10% vs FY25. Gross margin improved to 28.1% (vs 23.3% in Q3FY26 and 31.0% in Q4FY25). Absolute gross profit stood at Rs13.2bn, down 1.5% QoQ but up 1.3% YoY, primarily driven by lower raw material costs.
EBITDA increases by 15%YoY/-6.4% QoQ:
EBITDA came in at Rs4,424mn (15.4% YoY/ - 6.4% QoQ), (PLe: Rs3.1bn, Consensus: Rs3.01bn). EBITDAM stood at 9.4% (PLe:6.8%) as against a margin of 9.9% in Q4FY25 and 8.2% in Q3FY26, increasing by 120bps. Reported PAT was Rs1,556mn (-10% YoY/ -15% QoQ), while margin came at 3% vs4% & 3% in Q4FY25 & Q3FY26, respectively.
Key concall takeaways:
(1) Sulphuric acid plant at Paradeep with capacity of 0.5mmtpa and 0.1mmtpa at Mangalore commissioned during FY26.
(2) Pho’s acid capacity from 0.5mmtpa to 1mmtpa is on track, phos acid capacity at Paradeep to reach 0.7mmtpa from 0.5mmtpa in FY27.
(3) Capex for FY27 to be Rs6bn.
(4) Incremental volumes from the debottlenecking project at Paradeep are expected from H2FY27.
(5) Sulphur prices continue to remain elevated; domestic sourcing is from MRPL, Mangalore and IOC, Paradeep.
(6) Raw material availability is comfortable for Q1, while Q2 visibility remains uncertain.
(7) Current gas cost stands at $18–19
(8) Existing capacity utilization was 100% during FY26, currently plants are working at 80%.
(9) Raw material inventory currently stands at 30 days.
(10) NPK-20 volumes stood at 1,450,000mt in FY26, while sulfuric acid volumes were 4,10,000mt in Q4FY26.
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