Gujarat Narmada Valley Fertilizers & Chemicals Limited’s (GNFC) share is in Bullish Momentum – Stock on move

GNFC Share Price Technical Analysis

GNFC share price looking strong in its technical chart with strong trading volume over the last 10 trading days. The trading volume of the script is above 100 DMA over the last 2 trading days. It seems the counter is ready to move up in the next 10 to 15 days. Limited gas supply in Europe due to restrictions on Russia is further boosting this company’s momentum.

The stock completed its correction and formed a double bottom at the 544 level and is moving up. On the weekly chart, the share has formed a rounding bottom pattern and closed above its previous swing high of 697 level. On the daily chart, the GNFC share has formed a strong base at a range of 658 and 687 levels. Eventually, the GNFC share closed above its previous swing high of 698 and formed higher highs for the last two trading days on 28 Jul. 22. The stock price closed above all the short and long-term moving averages (20 DMA and 200 DMA). GNFC share has formed a bullish cross-over at 698 level where 21 DMA crossed 50 DMA from below with strong volume. This share looks strong for both short- and long-term investments at this level.

Momentum Indicators

Momentum indicators ADX and MACD are looking bullish on the daily chart. One may buy at this level or on dips for a 10 to 20% gain in the short term. Further, once it closes at the 720 level, the share has the potential to touch the 860 level within a short period. GNFC share can touch its all-time high of 910 or higher in the medium to long term if broader market supports.

GNFC share is trading at 6 Price to Earnings (PE) and available at 1.69 price-to-book (PB) value while sector PE is 12.27 PE and 2.6 PB. The debt-to-equity ratio of the company has been continuously 0 times in FY21 and FY22. The counter seems cheap in comparison to its sector PE with a low debt-to-equity ratio. It is a good stock to accumulate in correction. The average trading delivery percentage of the stock is above 30% for last week. That reflects strong demand for this stock in the market.

Restriction on Russia due to Ukraine and Russia war acts as a tailwind for this counter. GNFC is in the fertilizer industry that requires natural gas as a raw material. The limited supply of natural gas to Europe and particularly to Germany pushed fertilizer companies to reduce their production. This helps GNFC to capture a greater market share globally and that will help the share price to go up very quickly.

GNFC Share Fundamental Analysis

Gujarat Narmada Valley Fertilizers & Chemicals Limited (GNFC) is a joint venture between the Government of Gujarat and the Gujarat State Fertilizers & Chemicals Ltd. (GSFC). The company was strategically located in Bharuch, Gujarat in 1976. The location of the company helped GNFC to draw on the resources of the natural wealth of the land as well as the industrially rich reserves of the area.

GNFC is a producer of bulk chemicals and fertilizers. Most products that the company manufactures import substitutes and contribute to saving valuable foreign exchange. In a few products like Acetic Acid, TDI it is the only producer in the country whereas, in respect of product like Aniline, Formic Acid, it is among a very few producers in the country. Apart from the above, the company is also venturing into other areas such as Energy Sector, Electronics/ Telecommunications, and Information Technology forming ambitious and challenging additions to its corporate portfolio.

GNFC is set to become the largest producer of concentrated nitric acid (CNA) by the end of the year 2022. Currently, the company produces 1,15,0000 metric tonne (MT) CNA annually. GNFC has three plants of CNA at its Bharuch complex. Now the company initiated the process of installing the fourth plant with a 50,000-MT annual capacity and planning to commission it by end of this year. With this, GNFC’s production will go up to 1,65,000 MT by the end of the year 2022. This additional CNA capacity will help GNFC to cross Rs 10,000 crore turnover by the end of FY23. As of March-end 2022, the company’s turnover was nearly Rs 8,800 crore.

GNFC Share Price Financial Analysis

As per the latest quarterly report, GNFC limited delivered a strong annual revenue in FY22. The company operates in three segments – Fertilizers, Chemicals, and others. Approximately 70% of the total annual revenue in FY22 comes from the Chemicals segment. The total revenue has increased by 65% from INR 5,128.69 Crs in FY21 to INR 8,642.29 Crs in FY22. The EBITDA of the company has gone up by 138% to INR 2384 Crores in FY22. Profit after tax has gone up by 147% to reach INR 1704 Crores during the same time. The YoY EPS also has gone up by 147% to reach INR109 in FY22. This reflects the strong financial performance of the company. The government of India’s support in releasing timely subsidies and supporting the mixed fertilizer subsidy will further boost its performance.

GNFC limited is a mid-cap company with a market cap of INR 10256 crores with a face value of INR 10. Return on capital employed is ~33.1 percent while return on equity is ~24.6 percent. Promoters have not changed their holdings from June 2021 to June 2022 and they remained the same at 41.18 percent. DII has decreased its holdings in the company from 10.3 % in June 2021 to 5.35% in June 2022. However, DII shareholding increased from 5.22% in Mar 2022 to 7.3% in June 2022. FIIs have also increased their holdings from 9.46 percent in Mar 2022 to 5.35 percent in June 2022.This reflects resumed demand for GNFC shares both for short- and long-term investment purposes. FIIs have increased their shareholdings from 11.68 % in June 2021 to 22.64% in June 2022.

Company Promoters and Management

GNFC is run by strong leadership. Shri Pankaj Kumar, IAS is the Chairman of the company. He is the Chief Secretary of Gujarat State. Mr. Pankaj Kumar is a Senior IAS Officer of the 1986 batch. He has done his B. Tech (Civil Engineering) from IIT, Kanpur, and MBA (Public Policy & Management) from ICPE, Ljubljana. Mr. Pankaj Kumar has wide experience in various departments such as Revenue, Home, Health and Family Welfare, Agriculture, and Disaster & Relief Management in various capacities.

Shri Mukesh Puri, IAS is the director of the company. He is an lAS officer with 32 years of experience in public administration. Mr. Mukesh Puri has done Post Graduation in Economics from the Delhi School of Economics and subsequently obtained a Master’s Degree in International Political Economics from the University of Tsukuba, Japan.

Suggested Reading on Momentum stock section India Glycols, Gokex and PCBL

GNFC Share Price Daily Chart
GNFC Share Price Daily Chart
GNFC Share Price Weekly Chart
GNFC Share Price Weekly Chart

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