PL Capital has initiated coverage on Paradeep Phosphates Limited (PPL) with an 'Accumulate' rating and a target price of ₹120, representing a potential upside from the current market price of ₹110.35. According to reports from The Hindu BusinessLine, the brokerage has based its recommendation on 10x FY28E EPS valuation for the company. The coverage comes as PPL positions itself to capitalise on import substitution opportunities in India's chemicals sector through strategic expansion and integration initiatives.
PPL is implementing significant capacity expansion to strengthen its market position in the fertilizer sector. As reported by The Hindu BusinessLine, the company is expanding phosphoric acid capacity by 57% and sulfuric acid capacity by 100%. The company targets achieving full backward integration by FY29 through these capacity additions. Additionally, PPL is expanding its fertilizer capacity to reach approximately 5.0 million metric tonnes per annum by early FY29.
The company is strategically shifting its portfolio toward high-value complex fertilizers to reduce dependence on DAP (Di-Ammonium Phosphate). According to the brokerage report, this product mix optimization will help PPL capture the domestic supply gap in phosphatic and complex fertilizers. With the likely ramp-up in utilization and volumes post-expansion, PPL aims to scale its market share from 12% to 16% in the fertilizer segment.
PL Capital estimates robust financial growth for PPL over the forecast period. As reported by The Hindu BusinessLine, the brokerage projects revenue/EBITDA/PAT CAGR of approximately 10%/18%/23% over FY25-28E, driven by capacity additions, product mix improvement, and integration benefits. At the current market price, PPL trades at about 9x FY28E EPS and around 6x FY28E EV/EBITDA. The company's integrated operations and expanding scale are expected to drive sustained earnings growth over the medium term despite near-term margin pressure from elevated raw material prices.
The brokerage highlights significant import substitution opportunities in India's fertilizer sector. According to the report, India currently relies on 49% of DAP imports and 16% of NPK imports, creating substantial import substitution potential. The upcoming MCFL merger is expected to strengthen PPL's presence in South India, further enhancing its market position and operational capabilities in the region.
