STRONG BUY - RAMA PHOSPHATE

Highly Undervalued Fertilizer Scrip

Rama Phosphate Ltd.

BSE Code : 524037      CMP :  44.00

Mumbai based Rama Phosphate Ltd is engaged in production of Single Super Phosphate fertilizer (SSP). Until 2009, RPL had been making losses and had become BIFR case. Last year, company had succeeded
in implementing CDR Package wherein promoters brought in fresh equity. Now, company has made a strong
turnaround in its operations. Last year, its share price had touched Rs 147/. Due to bad market, scrip has crashed excessively. Current market cap is just 78 crores as against sales of nearly 400 crores and scrip is availableat 2.40xFY12E Eps. Book Value is already Rs 53 which should rise to Rs 70 as on 31st March
2012. For FY10, RPL had reported Loss of 1.67 crores on sales of 186.22 crores. However, after write-back of 20.51 crores, there was Net Profit of 18.83 crores.

On equity of 5.56 crores, Eps was 33.90 For FY11, Company reported HUGE improvement in its performance with sales almost doubling to 356.98 crores. Net Profit stands at 34.53 crores. Due to writeback of 5.01 crores, Net profit stood at 39.55 crores. Eps Rs 22.35 on enhanced equity of 17.69
crores. RPL is likely to further improve its performance in current year. For quarter ended June 2011, Its sales are 109.35 crores and Profit after Tax 10.82 crores, translating into Eps of 6.12 For FY12, RPL can achieve sales of Rs 390-400 crores with Profit after tax of Rs 32.50 crores (tax provision likely to be higher in current year and extraordinary income ). Eps for FY12 is estimated to be Rs 18.37 RPL is trading at 2xFY11 Eps and 2.40xFY12E Eps. Scrip is also available at 0.62xFY12E Book Value . Scrip is available at such tempting valuations mainly due to bad market sentiment. Share price has almost bottomed
out. Buying recommended as scrip can appreciate more than 50% in next few months. If broader markets bounce back, scrip can provide more 100% appreciation in15 months if markets dont fall heavily from current levels.