Additional DAP Subsidy - Analysis of beneficiaries amongst listed stocks

Current additional subsidy of Rs. 14,775 cr. (or additional Rs.1,200 per 50 kg bag) announced for DAP only (no other complex fertilizer like MoP, SSP or NPK) sufficient for 61.5 lakh MT sales for Kharif season (which lasts from July to September). Since DAP consumption remains almost similar over Kharif & Rabi season, DAP sales expected to rise atleast 15% YoY this season.

Due to rising input prices since last couple of months, farmers had switched to using SSP, while fertilizer makers also shift to manufacturing more NPK, which requires lesser amount of phospheric acid.  

FY21 DAP sales in India: 104 lakh MT DAP over 103 MT in FY20,
50% of DAP imported from China, as domestic manufacturing is declining,
DAP boosts yields in rice, wheat, sugar cane, cotton: on an average, 1 hectare wheat needs 100 kg DAP, while 1 hectare sugarcane needs 200 kg DAP.

IIFCO is India’s largest DAP manufacturer, accounting for over 20% of DAP sales in the country.
Other key listed players are:

RCF had only 1% mkt share in DAP in FY21, which accounted for 3% of company’s revenue.
GNFC and Deepak Fertilizer has miniscule DAP sales in FY21, which was met through imports

GSFC and Chambal are key beneficiaries of the additional DAP subsidy, as DAP accounted for 21-25% share of FY21 revenue and their market share is also decent. India’s 2nd largest phosphatic fertilizer maker Coromandel has 5% share of DAP market (mostly manufactured) but its valuation is rich, justified by higher margin.

FY22 Outlook for fertilizer sale positive:
1.    Rs. 65,000 cr govt subsidy received in FY21, improving cash position of most players
2.    Low channel inventory with dealers currently
3.    Expectation of normal monsoon for 3rd consecutive year may improve offtake.

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