This is a small company based in Vadodra. This company manufactures ethyl amines and is a leader in ethyl amines. The user industry of ethyl amines includes pharmaceuticals, FMCG, dyes and chemicals and also agro chemicals. Besides ethyl amines, this company also gets revenues roughly of Rs 2 crore from wind power.
If you look at the financials of the company for FY10, this company did sales of about Rs 45 crore. On sales of Rs 45 crore, the operating profit was about Rs 18.5 crore and a profit after tax (PAT) of about Rs 9.5 crore.
In Q1, there has been a 40% increase in sales to about Rs 15.5 crore. Operating profit is about Rs 4.6 crore and a PAT is Rs 2.3 crore. This company has got a very small equity of about Rs 6.5 crore, which means the effective market cap is just of about Rs 42 crore at the current market price of about Rs 63-64. The promoter holding is high at about 65%.
You have a company, which has got a leadership position in the industry; they are the leaders in Ethyl amines in the country. The company enjoys high operating profit margins of between 30-35%. The user industry that is pharma, FMCG, dyes and chemicals, agro chemicals are doing extremely well. The company has been a consistent dividend payer and they have been giving dividend for the past five-six years on a regular basis. Promoter’s holding is high at about 65%. If you see the growth, which the company has witnessed in the past three years, they are registering a growth of 40-50% on an annualised basis. So, at an earning per share (EPS) of Rs 15 and market price of Rs 63-64, you have a leader which is available at a PE multiple of just about 4-4.5. I think given its high operating margins and other fundamentals, I think the stock is bound to get re-rated.
Source: Internet (Moneycontrol.com by Ashish Chug)
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