Prabhudas Lilladher Starts Paradeep Phosphates at 'Accumulate', Sets Rs 120 Target

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AuthorAnanya Iyer|Published at:
Prabhudas Lilladher Starts Paradeep Phosphates at 'Accumulate', Sets Rs 120 Target
Overview

Prabhudas Lilladher has started covering Paradeep Phosphates Limited (PPL) with an 'Accumulate' rating and a Rs 120 price target. The firm sees PPL benefiting from India's drive to replace imports, citing the company's plans for backward integration and capacity growth. While short-term margin challenges exist, PPL is expected to achieve steady earnings growth from its integrated operations, scale, and merger synergies.

Analyst Starts Coverage: 'Accumulate' Rating and Rs 120 Target

Prabhudas Lilladher has launched coverage on Paradeep Phosphates Limited (PPL), assigning an 'Accumulate' recommendation and setting a price target of INR 120. This target is based on valuing the company at 10 times its projected earnings per share for fiscal year 2028.

PPL's Strategy: Replacing Imports, Expanding Capacity

The brokerage report highlights PPL's strategic position to benefit from India's push to replace imported chemicals. Key moves include significant capacity increases for phosphoric acid (aiming for a 57% rise) and sulfuric acid (aiming for a 100% rise). PPL also plans to achieve full backward integration by fiscal year 2029. The company is actively shifting its product mix towards higher-value complex fertilizers, reducing reliance on Diammonium Phosphate (DAP).

Boosting Production and Integrating MCFL

Paradeep Phosphates aims to raise its total fertilizer production capacity to about 5.0 million tonnes per annum by early fiscal year 2029. The recent merger with MCFL (Mangalore Chemicals and Fertilizers Limited) is expected to strengthen PPL's market presence, particularly in Southern India.

Financial Outlook and Current Valuation

Analysts forecast strong financial growth for PPL, projecting a Compound Annual Growth Rate (CAGR) of around 10% for revenue, 18% for EBITDA, and 23% for Profit After Tax (PAT) between fiscal years 2025 and 2028. This growth is supported by new capacity, improved product offerings, and integration advantages. At current market prices, PPL trades at about 9 times its estimated FY28 earnings and 6 times its FY28 Enterprise Value to EBITDA, suggesting potential upside.

While higher raw material costs could affect profit margins in the short term, PPL's integrated operations, growing scale, and synergies from the MCFL merger are expected to drive consistent earnings growth over the medium term.

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