Why is Chambal Fert. falling/rising?

Recent Price Momentum and Market Context

Chambal Fertilisers has been on a steady ascent over the past week, delivering a 6.32% return, significantly outperforming the Sensex’s marginal 0.02% gain during the same period. The stock has recorded gains for five consecutive trading sessions, signalling renewed investor confidence. On 16-Dec, it reached an intraday high of ₹459, marking a 5.15% increase from previous levels. This short-term strength is underscored by the stock trading above its 5-day and 20-day moving averages, although it remains below the longer-term 50-day, 100-day, and 200-day averages, indicating some resistance at higher levels.

Liquidity remains adequate, with the stock’s trading volume supporting transactions up to ₹0.85 crore based on recent averages. However, it is noteworthy that investor participation has declined, with delivery volumes on 15-Dec falling by nearly 53% compared to the five-day average, suggesting cautious trading despite the price rise.

Strong Quarterly Performance and Financial Health

The recent quarterly results released in September 2025 have been a key driver behind the stock’s positive momentum. Chambal Fertilisers reported net sales of ₹6,412.76 crore, reflecting a robust growth rate of 47.55% compared to the previous period. This surge in sales was accompanied by the highest-ever quarterly PBDIT of ₹841.73 crore, signalling improved operational efficiency and profitability.

Additionally, the company’s cash and cash equivalents reached a record ₹4,990.10 crore in the half-year period, enhancing its liquidity position and financial flexibility. These strong fundamentals are supported by a high return on capital employed (ROCE) of 25.78%, indicating effective utilisation of capital resources. The company also maintains a conservative debt profile, with a low Debt to EBITDA ratio of 0.92 times, underscoring its ability to service debt comfortably.

Chambal Fertilisers’ return on equity (ROE) stands at a healthy 18.9%, and the stock trades at a price-to-book value of 1.8, suggesting a fair valuation relative to its peers. Despite the stock’s negative one-year return of -16.17%, profits have grown by 20.9% over the same period, resulting in a favourable PEG ratio of 0.5. This indicates that the stock may be undervalued relative to its earnings growth potential.

Institutional investors hold a significant 22.35% stake in the company, reflecting confidence from well-informed market participants who typically conduct thorough fundamental analysis before committing capital. This institutional backing often provides stability and can support price appreciation during positive earnings cycles.

Long-Term Challenges Temper Optimism

Despite the recent gains and strong quarterly results, Chambal Fertilisers faces headwinds in terms of its long-term growth trajectory. Over the past five years, net sales have grown at a modest annual rate of 8.41%, while operating profit growth has been even more subdued at 2.27% per annum. This sluggish growth has contributed to the stock’s underperformance relative to broader market indices such as the BSE500 over one-year, three-year, and three-month periods.

The stock’s year-to-date return of -9.42% contrasts sharply with the Sensex’s 8.37% gain, highlighting the challenges investors face in the medium term. These factors may explain why some investors remain cautious despite the recent rally, as the company’s growth fundamentals have not consistently matched market expectations.

Conclusion: A Stock on the Rise but Not Without Risks

Chambal Fertilisers & Chemicals Ltd’s recent share price increase on 16-Dec is primarily driven by strong quarterly sales and profit growth, robust cash reserves, and efficient capital management. The stock’s outperformance relative to the sector and the Sensex in the short term reflects renewed investor interest, bolstered by institutional holdings and a favourable valuation metric in terms of PEG ratio.

However, the company’s long-term growth rates remain modest, and its stock has underperformed broader indices over multiple time horizons. Investors should weigh the recent positive earnings momentum against these structural challenges when considering their positions. The current rally may represent a recovery phase, but sustained gains will likely depend on the company’s ability to accelerate growth and maintain profitability in a competitive fertiliser sector.

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