RCF - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 20 Dec 25, 11:16 pm

Fundamental Rating: 2.9

📊 Financials: Rashtriya Chemicals & Fertilizers (RCF) has reported quarterly PAT of ₹106 Cr vs ₹54.1 Cr previously, showing growth momentum. EPS at ₹5.66 is modest relative to price. ROE at 5.0% and ROCE at 7.47% reflect weak capital efficiency. Debt-to-equity ratio of 0.56 indicates moderate leverage, manageable but worth monitoring. Dividend yield of 0.96% provides limited income support.

💹 Valuation: Current P/E of 24.8 is above industry PE of 20.3, suggesting slight overvaluation. Book value ₹89.3 vs CMP ₹139 implies a fair P/B multiple (~1.56x). PEG ratio of -0.91 highlights negative earnings growth relative to valuation. Intrinsic value appears lower than CMP, signaling caution despite recent profit growth.

🏭 Business Model: RCF operates in fertilizers and chemicals, with government backing and strong distribution networks. Competitive advantage lies in established brand and role in India’s agricultural sector. Risks include regulatory pricing, raw material volatility, and cyclical demand tied to monsoon and crop cycles.

📈 Entry Zone: Technically, support lies near ₹120–₹125. CMP at ₹139 is below DMA 50 (₹144) and DMA 200 (₹150), indicating weakness. Entry is advisable closer to ₹120 for margin of safety.

📌 Long-term Holding: Government support and fertilizer demand provide stability, but weak return ratios and stretched valuations limit attractiveness. Long-term holding requires caution unless profitability improves and valuations normalize.

Positive

• 📈 Quarterly PAT growth of 34.5% shows improving earnings momentum.
• 📊 EPS of ₹5.66 supports earnings visibility.
• 🏭 Government backing ensures stability in fertilizer and chemical operations.
• 💡 Moderate debt-to-equity ratio (0.56) supports financial stability.

Limitation

• ⚠️ Weak ROE (5.0%) and ROCE (7.47%) reflect poor capital efficiency.
• 📉 PEG ratio of -0.91 highlights negative earnings growth.
• 💸 Low dividend yield (0.96%) offers limited income support.
• 📉 CMP below DMA 50 and DMA 200 indicates technical weakness.

Company Negative News

• 📉 Trading volumes lower than weekly average, showing reduced market participation.

Company Positive News

• 📈 Marginal increase in FII holdings (+0.03%) and DII holdings (+0.02%) shows investor confidence.

Industry

• 🏭 Fertilizer and chemical sector trades at industry PE of 20.3, highlighting RCF’s premium valuation.
• 📊 Industry growth supported by agricultural demand and government subsidy programs.

Conclusion

⚖️ RCF shows improving profits but weak return ratios and stretched valuations. Entry is advisable near ₹120–₹125 support zones. Long-term holding requires caution unless profitability improves and valuations align with industry averages.

Would you like me to extend this with a peer benchmarking overlay against other fertilizer PSUs like NFL and GNFC to highlight comparative valuation and efficiency?