Chinese companies’ export hesitancy fuels Indian fertiliser stocks

Mumbai: Shares of fertiliser producers rallied on Friday after some of the Chinese companies in the sector said they would stop exporting to assure supplies in their domestic market. Analysts said this move could benefit Indian companies, which are already on investors’ radar due to cheaper share valuations.

While Coromandel International and Fertilisers and Chemicals Travancore (FACT) gained 6% each, Madras Fertilizers, Zuari Agro, Khaitan Chemicals, Nagarjuna Fertilizers, and Deepak Fertilisers rallied nearly 5% each.

China’s state planner said in a statement that it had summoned the fertiliser firms for a discussion against hoarding and speculation. The move is the latest by Beijing to tackle soaring prices of major raw materials, according to Reuters.

“Fertiliser companies are expected to benefit, as there are talks of China suspending exports, post the floods,” said S Ranganathan, head of research, LKP Securities. “Monsoon in India has been good in select states, and with subsidies being released, many fertiliser companies are seeing investor appetite due to attractive valuations.”

At home, the government told fertiliser companies in April to roll back the maximum retail price (MRP) of non-urea fertilisers after some firms raised prices. To cover the cost of the increase in subsidy, the government in May has allocated `14,800 crore towards fertiliser subsidy for Kharif-2021.

Expectations of a normal monsoon for the third consecutive year could boost demand for complex fertilisers, said analysts.

“The fertiliser space continues to look good from a medium to long-term perspective as the domestic market offers sizeable opportunities for domestic players due to higher dependence on imports,” said Binod Modi, head strategy, Reliance Securities. “Further, the expectations of favourable monsoon and sufficient water levels augur well for the industry.”