Chambal Fertilisers – A Beneficiary of Rural Revival?

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This is part 1 of the Fundamental Analysis of Chambal Fertilisers & Chemicals Ltd (CFCL). An explainer video is below that explains the business model, sector analysis, and 3 moats of the stock:

WATCH THIS VIDEO explaining the fundamentals of the stock in depth!!

Let us Start with the Chambal Fertilisers History

Chambal Fertilisers History

Management of Chambal Fertilisers

Chambal Fertilisers Management

Business Overview

Chambal Fertilisers Business Overview

Core Market Area of Chambal Fertilisers

Revenue Mix of Chambal Fertilisers

Urea accounts for 2/3rd of the total sales

Market Share

Market Share of Chambal Fertilisers

Chambal Fertilisers & Chemical generates most of its revenue from Urea. Hence, the company follows the typical business model of a Urea manufacturer.

To know what is Urea and how is Urea Subsidy is determined and also learn the typical business model of a Urea company watch this video here.

Let us focus on the other products made by this company:

Also Read on FinMedium:  Amber Enterprise India Ltd. Q1 FY2021 Result Update
Business Model of Chambal Fertilisers

The above-mentioned products are covered under the Nutrient Based Subsidy (“NBS”) policy of the Government of India.

The pricing of these products is de-controlled and the Government of India pays a fixed amount of subsidy based on the different nutrients in these fertilizers.

DAP sales has been growing very fast for CFCL

the Subsidy as %age of sales has decreased past 6 months owing to highers nonurea sales

To paraphrase Warren Buffett – if you are investing in a commodity product company then one should always invest with the least-cost manufacturer.

Fertilizer is a commodity. Hence, a manufacturer with the least cost of manufacturing only can win in the long term. So we have analyzed the efficiency and capacity utilization of the 3 plants owned by the company and here what we have found:

Operating Efficiency of Chambal Fertilisers

3 Unique Moats of CFCL

Chambal Fertilisers Moat

With this, the first leg on CFCL gets covered.

In the next blog we will cover the following:

  • Financial Analysis: Numbers seldom lie!
  • 4 Tailwinds helping the stock fly!
  • Valuation: How much to pay for this stock?

Also, watch the coverage on Coromandel International Ltd below:

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Amitabh Vatsya

Amitabh Vatsya

Amitabh Vatsya is an active Investment Vlogger (http://youtube.com/c/Sadhansimplified) | Loves to share his ideas at http://wealthsutra.wordpress.com | Follow him @amitabhvatsya
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