GNFC

GNFC (Gujarat Narmada Valley Fertiliser) is one those fertiliser company where Govt of Gujarat has majority stake. It got battered down in past due to one of the decision of Gujarat Govt to have PSU use part of their savings for the social cause. This created a knee jerk reaction and GNFC was battered down from highs to 150 Rs to 98 now.

If you look at the company, its book value is 112 Rs, current market price is 98Rs. Its industry peers are quoting at price/book value of more than 1.5. This one is quoting at .85 of its book value.

The PE of the company is 5.85 where in industry PE is 9.82. If we put a conservative PE of 7 for this company then also it should be quoting around 161 Rs (23 being the EPS of share as per 2008 results).

Looking at the balance sheet for past years, its top line and bottom line both are growing quite handsomely. With Gujarat increasing its agriculture output year on year, it augurs good news for fertiliser companies especially which are based out of Gujarat.

Based on the current scenario, I recommend a buy of GNFC below 105 Rs, the target being 200 Rs by Dec 2010.

Disclaimer: Do your own due diligence before buying stocks.