FACT - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 05 Nov 25, 7:43 am

Fundamental Rating: 2.7

📊 Financial Overview: Fertilisers and Chemicals Travancore Ltd (FACT) has a substantial market cap of ₹58,029 Cr, but its core financials raise red flags. The company’s debt-to-equity ratio of 1.32 is high, and return metrics are weak with ROCE at 8.65% and ROE at just 1.61%. Quarterly PAT plummeted from ₹57.6 Cr to ₹4.28 Cr, despite a reported 108% profit variation, likely due to one-off adjustments or accounting changes

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💹 Valuation Metrics: The stock trades at an extremely inflated P/E of 716, far exceeding the industry average of 22.7. With a Book Value of ₹21.2, the P/B ratio is ~42.3, and a PEG ratio of -11.4 signals negative earnings growth. Dividend yield is negligible at 0.02%, offering no income support

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🏭 Business Model & Competitive Advantage: FACT is India’s first large-scale fertilizer plant, operating under the Department of Fertilizers. It manufactures chemical fertilizers and industrial chemicals. While its strategic importance and government backing offer some stability, operational inefficiencies and poor profitability limit its competitive edge

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📈 Technical Indicators: RSI at 47.0 suggests neutral momentum. MACD at -11.9 indicates bearish divergence. The stock is trading below both its 50 DMA (₹924) and 200 DMA (₹903), signaling short-term weakness. Volume is significantly below average, pointing to reduced investor interest

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🎯 Entry Zone: A safer entry point would be around ₹750–₹800, offering a better valuation buffer and aligning with technical support zones.

🕰️ Long-Term Holding Guidance: FACT is a high-risk investment due to its weak fundamentals and extreme valuation. Long-term investors should be cautious and consider entry only after significant correction and signs of operational improvement.

✅ Positive

• Large market cap and strategic role in fertilizer supply.
• EPS of ₹1.46 and reported profit variation of 108% (likely due to one-time factors).
• FII holding remained stable (+0.01%).

⚠️ Limitation

• Extremely high P/E (716) and negative PEG (-11.4) indicate severe overvaluation.
• ROE (1.61%) and ROCE (8.65%) are below industry standards.
• High debt-to-equity ratio of 1.32 raises financial risk.

📉 Company Negative News

• Quarterly PAT dropped sharply from ₹57.6 Cr to ₹4.28 Cr.
• DII holding declined by 8.56%, signaling reduced domestic institutional confidence.

📈 Company Positive News

• Stock has gained 60.7% from its 52-week low of ₹565.

🏭 Industry

• Fertilizer sector benefits from government subsidies and rural demand.
• Industry P/E of 22.7 suggests moderate valuation across peers.

🧾 Conclusion

• FACT shows weak fundamentals and extreme valuation risk.
• Consider entry only near ₹750–₹800 after signs of earnings stability.
• Suitable only for high-risk investors with a speculative outlook.

Sources

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