Equity99
Bharat Agri (Buy)
CMP: ₹141.10
Target: ₹490
Bharat Agri Fert & Realty has been a fertiliser player (Single Super Phosphate) since inception. With a total installed capacity of 1.32 lakh mt, the manufacturing factory is located in Wada, Palghar on company’s owned land parcel of 18.36 acres. This business contributed about 60 per cent of the revenue last year, that is, ₹20.1 crore with negative operating margin of 6.5 per cent mainly due to GST led issues and government policy changes last year. The plant operated at 40 per cent capacity utilisation during FY18.
With a networth of ₹75.6 crore, the stock trades at around 1x P/BV. The company is at an inflection point with all its business verticals are at the cusp of massive growth. The fertiliser business is set to do well with better capacity utilisation and improved working capital cycle will lead to higher profitability. This business is set to touch revenue of ₹50 crore by FY21. We value this business at ₹75 crore at 2x sales of FY20. The surplus land parcel of 106 acres that the company owns at Wada is valued conservatively at ₹106 crore. The unsold inventory of 11 flats of Phase I Majiwada project will cash in ₹15 crore for the company in this year. Phase II Project of Majiwada is valued conservatively at 1x sales of ₹360 crore. Overall,the realty business is valued at ₹481 crore.
We recommend a strong buy from short term as well as long term point of view due to multiple triggers.