Prabhudas Lilladher Maintains 'Accumulate' Rating on Paradeep Phosphates, Sets Target Price at Rs 120
Paradeep Phosphates Research Report
Initiation of Coverage: Accumulate Rating
We initiate coverage on Paradeep Phosphates Ltd. (PPL) with an Accumulate rating and a target price of INR120, based on 10x FY28E EPS. The company is poised to capitalize on the import substitution opportunity in India's chemicals sector through backward integration, product mix optimization, and capacity expansion.
Key Initiatives
Read also: Oshea Herbals Aims for Rs 650 Crore Revenue Amidst Expansion Efforts
- Capacity Expansion: PPL is expanding its phosphoric and sulfuric acid capacities by 57% and 100%, respectively, to achieve full backward integration by FY29.
- Product Mix Optimization: The company is shifting its portfolio towards high-value complex fertilizers, reducing reliance on DAP.
- Capacity Addition: PPL is expanding its fertilizer capacity to reach approximately 5.0 mmtpa by early FY29.
- Mergers and Acquisitions: The MCFL merger will strengthen PPL's presence in South India.
Outlook and Financial Projections
We estimate revenue/EBITDA/PAT CAGR of ~10%/18%/23% over FY25-28E, driven by capacity additions, product mix improvement, and integration benefits. At current market price, PPL trades at ~9x FY28E EPS and ~6x FY28E EV/EBITDA.
Valuation
- Price to Earnings (P/E) Ratio: 9x FY28E EPS
- Enterprise Value to EBITDA (EV/EBITDA) Ratio: 6x FY28E EV/EBITDA
Investor Takeaway
Investors should consider accumulating Paradeep Phosphates due to its potential for sustained earnings growth.
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