Guj. Alkalies (Rs. 70.00)
BSE Code : 530001
Market Cap : Rs. 500 Cr.
TTM EPS : Rs. 43
Pmt Stake : 37 %
52W H/L : Rs. 203/55
P/E Ratio : 1.6x
Dividend : 35%
Established in 1973, Gujarat Alkalies & Chemicals Ltd (GACL) has emerged as the largest producer of caustic soda in India commanding a market share of 18% in domestic chlor-alkali industry. With Caustic-Chlorine being it’s prime product, company has diversified into value added products like sodium cyanide, sodium ferrocyanide, chloromethanes, hydrochloric acid, potassium carbonate, phosphoric acid (85%), hydrogen peroxide etc. Its product portfolio of 26 chemicals provides dual benefit to the company by hedging against any cyclical fluctuations in the Chlor-Alkali Industry. Presently, company derives nearly 65% revenue from chlor alkali business and the rest 35% comes from the other value-added product. Thus company cater to host of industries like textiles, pulp & paper, soaps & detergents, alumina, water treatment, petroleum, fertilizers pharmaceuticals, agrochemicals, dyes & dyes intermediates to name a few. Besides company has made its presence felt across the globe by exporting products to USA, Europe, Australia, Africa, Far & Middle East countries, China and South Asian markets. Notably,
GACL is accredited with IS/ISO 9001:2000, ISO 14001:2004 and IS 18001:2000 certifications
and has been ranked among the top 25 listed Companies in respect of excellence in Corporate Governance by The Institute of Company Secretaries of India for last three consecutive years.
Despite being one of the lowest cost producers, performance of GACL depends a lot on the prices of its product which are quite volatile due to market dynamics. Secondly it also faces threat from cheap imports although anti dumping duty has been imposed on import of products like caustic soda lye/flakes and potassium carbonate from various countries. For H1FY09, GACL has reported encouraging set of nos as sales increased by 35% to Rs 729 cr but PAT grew marginally to Rs 138 cr due to substantial fall in other income. It has already clockedan EPS of Rs 19 for first half. Last fiscal, company had got Rs.16 crore compensation for CTC phase out under Montreal Protocol and Rs.16.50 crore against carbon credit. Considering all the factors, company may end the current year with sales of Rs 1250 cr and PAT of Rs 180 cr on conservative basis. This works out to an EPS of Rs 25 on current equity of Rs 73.40 cr. Although company has taken a hit due to mark-to-market loss on derivative exposure, still its not substantial and within company’s tolerance limit. Having an gross block of Rs 2200 cr, reserves to the tune of Rs 1000 cr (Book value Rs 147), low debt equity ratio of 0.3:1, EV/EBIDTA of approx 2x times, it’s a value buy at current market cap of merely Rs 500 cr. Long term investors can buy at current levels for 50% gain in 12~15 months.
BSE Code : 530001
Market Cap : Rs. 500 Cr.
TTM EPS : Rs. 43
Pmt Stake : 37 %
52W H/L : Rs. 203/55
P/E Ratio : 1.6x
Dividend : 35%
Established in 1973, Gujarat Alkalies & Chemicals Ltd (GACL) has emerged as the largest producer of caustic soda in India commanding a market share of 18% in domestic chlor-alkali industry. With Caustic-Chlorine being it’s prime product, company has diversified into value added products like sodium cyanide, sodium ferrocyanide, chloromethanes, hydrochloric acid, potassium carbonate, phosphoric acid (85%), hydrogen peroxide etc. Its product portfolio of 26 chemicals provides dual benefit to the company by hedging against any cyclical fluctuations in the Chlor-Alkali Industry. Presently, company derives nearly 65% revenue from chlor alkali business and the rest 35% comes from the other value-added product. Thus company cater to host of industries like textiles, pulp & paper, soaps & detergents, alumina, water treatment, petroleum, fertilizers pharmaceuticals, agrochemicals, dyes & dyes intermediates to name a few. Besides company has made its presence felt across the globe by exporting products to USA, Europe, Australia, Africa, Far & Middle East countries, China and South Asian markets. Notably,
GACL is accredited with IS/ISO 9001:2000, ISO 14001:2004 and IS 18001:2000 certifications
and has been ranked among the top 25 listed Companies in respect of excellence in Corporate Governance by The Institute of Company Secretaries of India for last three consecutive years.
Despite being one of the lowest cost producers, performance of GACL depends a lot on the prices of its product which are quite volatile due to market dynamics. Secondly it also faces threat from cheap imports although anti dumping duty has been imposed on import of products like caustic soda lye/flakes and potassium carbonate from various countries. For H1FY09, GACL has reported encouraging set of nos as sales increased by 35% to Rs 729 cr but PAT grew marginally to Rs 138 cr due to substantial fall in other income. It has already clockedan EPS of Rs 19 for first half. Last fiscal, company had got Rs.16 crore compensation for CTC phase out under Montreal Protocol and Rs.16.50 crore against carbon credit. Considering all the factors, company may end the current year with sales of Rs 1250 cr and PAT of Rs 180 cr on conservative basis. This works out to an EPS of Rs 25 on current equity of Rs 73.40 cr. Although company has taken a hit due to mark-to-market loss on derivative exposure, still its not substantial and within company’s tolerance limit. Having an gross block of Rs 2200 cr, reserves to the tune of Rs 1000 cr (Book value Rs 147), low debt equity ratio of 0.3:1, EV/EBIDTA of approx 2x times, it’s a value buy at current market cap of merely Rs 500 cr. Long term investors can buy at current levels for 50% gain in 12~15 months.
