Target: ₹120
CMP: ₹110.35
We initiate coverage on PPL with ‘Accumulate’ rating and TP of ₹120, based on 10x FY28E EPS. PPL is positioning itself to capitalise on the import substitution opportunity in India’s chemicals sector, through backward integration, product mix optimisation and capacity expansion. It is expanding phosphoric and sulfuric acid capacity (+57 per cent and +100 per cent, respectively) and targets to achieve full backward integration by FY29.
Further, it is shifting its portfolio toward high-value complex fertilizers, thus reducing reliance on DAP. PPL is expanding its fertilizer capacity to reach about 5.0 mmtpa by early FY29. Also, the MCFL merger will strengthen PPL’s presence in South India.
While elevated raw material prices may exert near-term margin pressure, we believe the company’s integrated operations, expanding scale and merger synergies will drive sustained earnings growth over the medium term.
We estimate revenue/EBITDA/PAT CAGR of about 10/18/23 per cent over FY25–28E, driven by capacity additions, product mix improvement and integration benefits. At CMP, PPL trades at about 9x FY28E EPS and around 6x FY28E EV/EBITDA.
India’s reliance on imports for phosphatic nutrients (49 per cent of DAP, 16 per cent in NPK), underscores import-substitution opportunity. With likely ramp-up in utilisation and volumes post-expansion, PPL will be able to capture the domestic supply gap in phosphatic and complex fertilizers and scale market share to 16 per cent from 12 per cent.