Liberty Phosphate The Journey has Just Begun

With advent of Nutrient Based Subsidy the fortunes of the Non Urea fertilizer makers has gone change for better.This policy is a major game changer & should lead to rerating of the entire sector as is evident by block buster recent results of fertilizer companies.

One such company is Udaipur based Liberty Phosphate.Its one of the largest SSP Single Super Phosphate maker .Indian soil is very deficient of Sulphur due to heavy n indiscriminate use of urea which was very heavily subsidised.Consequently the productivity level is much below in India.In Egypt more than 90% fertilizer used is SSP & the productivity level is 3 times that of India.Being located in Udaipur gives it natural advantage of being in close proximity to Rock Phosphate & sulphuric Acid( the waste product of HZL).

Liberty Phoshpate manufactures and trades** single super phosphate** (SSP) in India. The company sells its SSP fertilizer under the Double Horse brand for various crops like oil seeds, groundnut, and potato. It also produces SSP in granulated form, called** GSSP**. Liberty Phosphate also makes** nitrogen, phosphorus and potassium** (NPK), fertiliser, soil conditioner, phospho bupsum, magnisium sulphates, and zinc sulphate.

With installed capacity of 660,000 tonnes per annum, Liberty Phosphate is one of the larger players in the SSP Industry. The companyâs state-wise SSP capacity is as follows: Rajasthan 800 tonnes per day (tpd), Gujarat 200 tpd, Maharashtra 150 tpd, and Madhya Pradesh 300 tpd. As SSP is a bulky product, transportation cost is high and, hence, with many plants spread over various parts of the country puts the company in an advantageous position.

With new subsidy scheme in place the co like other cos is witnessing huge demand for its products.The co is expected to post an EPS of 20 in March 11 & 35 in March 12 n is thus currently available at a PE of 3.9 & market cap of 100 cr with sales in March 11 expected to touch 500 crore in March 11 itself.

Khaitan fertilizers has nearly tripled in price recently while for Liberty the journey has just begun.

This was after both the companies were recommended by Capitalmarket magzinein June 10.

Excellent results announced with EPS touching 20 on annualized basis ,An interim dividend also announced of rs 0.6.

SSP fertilizer sector being rerated.

Stock 20-20 also recommending this scrip stronly after the results

Superb results yet again from Liberty. EPS touching 23. wonder when the rerating will happen?

Looking at the results, one can see RM cost at around 50% of sales. However, other companies in the same sector like Rama Phosphates has RM cost at around 90% of sales. Khaitan Fertlisers is yet to declare its results. So not sure how come Linerty Phosphates has posted such good margins. Will have to wait and see Khaitan results before reaching a conclusion.

Liberty phosphates is a 25 year old company headed by Dhanani dawoodi bohra family well versed into business.

They have an edge over their competitors by their abilty to source competitively RM from middle east due to their age old relationship.

Now they are expanding into UP by establishing a factory.

Their competitors wud have held on to their old stock due to increases subsidy n consequently prices applicable from April 1,2011.hence the bad results but right time to pick up

Khaitan results out today and Eureka!!! Finally resolved the puzzle as to why Liberty Phosphate has better margins than Khaitan Fertiliser and Rama Phosphates. Khaitan and Rama derive a substantial portion of their revenues from Soya processing which is a very low margin business. Hence, their margins on a overall basis is very low. Whereas Liberty Phosphates is not into Soya Processing. Hence, better overall margins.

My other kapoot Liberty Phosphate is reforming very fast.

He has become an accha bacchha . Smile

lot of delivery based buying happening n price also moving up. Hit bhai your technical analysis urgently required now. June 11 results shud be great due to increased subsidy from 1 April 11 .

The macro story of Indian soil crying for sulphur from SSP is turning true.Pe only 2.8 ,Book value 61, interim dividend already paid,market cap of only 91 crores makes it an attractive buy.

Todays interview MD projects an EPS of 38 rs in March 12 & present utilisation of 78%


Good results once again by Liberty. Makes it to my top 3 buy list and will stick my neck out to say that it is atleast a 4 bagger.

Lot of insider buying by Dhanani family happening.

Also the old fertilizer secy Sutanu Behuria who was brother of jailed ex telecom secy has been shifted out n replaced by a new secy.Now things shud hopefully improve at fertilizer ministry & reforms shud gather pace n rerating to continue.

Bot some. We should dig more here…looks very interesting if current nos are sustainable

Getting interested in this one, finally:). Some quick questions for those who track

1). Is there an overhang on the sector still? why such low valuations despite consistently improving results?

2). What is the progress on the new capacity in UP?

3). Is this the largest SSP maker? who are the nearest SSP competitors?

4). The sector has been prone to govt policy intereference. What indications are there that this new Nutrients based policy that favours SSP is here to stay?

This will help me come up to speed quickly. Grateful if you can point to any other significant aspects that aids understanding of the sector/business

Other issues/concerns:

1). Looks like the subsidy on SSP doesnt reach the farmer directly but is routed through the Company. What is the effect of delayed concession payments to the company? Has anyone studied the pattern, is it quarterly or the subsidies are paid annually at the end of the year? Can someone educate us on this crucial aspect.

2). What is the co-rrelation with Monsoon?

More issues that I need to understand:

1). Subsidy Quantum - There has been a lot of noise on the burgeoning “Urea” subsidy bill. I am aware there must have been a cut in Urea subsidies, even without following the news. Why will SSP not see a subsidy cut? Isn’t there a real danger of that?

2). What about input RM costs? How is the volatility there? Is there a significant import content, then Rupee depreciation can be a big overhang on the stock?

3). How does the farmer choose which fertiliser to use? Given the hype over Urea, my guess would be he chooses the cheapest - irrespective of what nutrients are essential or not. So what are the alternative fertilisers for the farmer _ Urea, SSP, DAP, PKP,…

4). What are the relative prices per kg? - Urea, DAP, SSP - what is the most prone to be dumped if subsidy is substantially cut?

Final top-of-mind questions:

1). It looks like SSP based fertlisers have many years of growth ahead. Given that, many larger players may have already jumped into SSP fray??

2). How do the production capacity stack up current & planned, between the bigger players?

3). Its almost certain that the sector will see heightened competitive activity…in FY13 and coming years. THE NBS Policy was announced in FY10? So by now some of the new entrants might have also added up capacity or are ready to commence proiduction in a big way.

4). While there may be good growth, Margin contraction in future has to be factored in. FY12 results cannot be th ebenchmark to project forward??



One more…can’t be greedy enough, can we. Has anyone done a proper peer comparison…capacity, growth, valuations??

that might tell a story of its own??

Strong performance continues; maintain our preference for SSP manufacturers

Strong result; way ahead of expectation

LibertyPhosphateposted a good revenue growth in Q4FY2012 which was way ahead of expectations. The same was on account of higher volumes generated due to good demand. The total revenue in Q4FY2012 increased by 126.6% year on year (YoY) to Rs149.5 crore. The volume of SSP was robust, increasing from 80,000 tonne in Q4FY2011 to 1.49 lakh tonne in Q4FY2012, ie an increase of 86% YoY. In Q4FY2012 the reported profit after tax (RPAT) stood at Rs16.7 crore which is 89.6% higher than Q4FY2011’s. The results include foreign exchange (forex) gains of Rs1.8 crore. Adjusting to this the profit after tax (PAT) stood at Rs15.2 crore which is 71.6% higher than in the corresponding quarter of the previous year. Going ahead we believe that the company will maintain good growth in terms of volume and realisation.

Surge in input cost results in margin contraction

The operating margin in Q4FY2012 declined by 760 basis points to 16.4%, mainly due to higher prices of key inputs - rockphosphateand sulphuric acid. Despite the rising input cost (accentuated by the weakening rupee) and pressure on margins, the company posted a 55% growth in operating profits and 90% growth in its net profits to Rs16.7 crore during the quarter. During the quarter the maximum retail price of SSP remained at Rs4,800 per tonne which is 34% higher than Q4FY2011’s price.
Future expansion to drive growth ahead:LibertyPhosphateis planning to enhance its capacity for manufacturing SSP from 5.6 lakh tonne in FY2012 to 9.24 lakh tonne by the end of FY2013, which amounts to an increase in the installed capacity by 64%. This will makeLibertyPhosphatethe largest player in the SSP industry. Going ahead, capacity expansion will drive the volume growth. Currently the company is working at 75% capacity utilisation and going ahead it will maintain the capacity utilisation at around the same level.

Outlook and valuation

SSP is one of the cheapest fertilisers available in India after urea. SSP manufacturers have seen a turn-around at operating levels after the introduction of the nutrient based subsidy for non urea fertilisers. We believe that going ahead SSP will be the growth driver for the fertiliser industry and it may also replace the incremental usage of DAP which costs three times the cost of SSP. At the current market price the stock trades at 2.3x its FY2013 earnings and 2.1x FY2014 rough-cut earnings estimates. We continue to have a positive stance on the company and the SSP industry.LibertyPhosphatehas appreciated by over 53% since we introduced the stock with a positive bias in the “Viewpoint” section of our daily online publication “Investor’s Eye” on September 7, 2011. We maintain our positive bias on the stock.

Source: ShareKhan

Sharekhan Report on Liberty Phosphate )- 9 Sep, 2011

HDFC Securities Report on Liberty Phosphate )- 17 May 2012