Manali Petrochemicals Ltd. has posted an excellent set of numbers for FY 2012 and looks undervalued based on the improving financial numbers & growth ahead:
|Particulars||Mar 12 Qtr||Mar 11 Qtr||% Variation||FY 2012||FY 2011||% Variation|
*All Financial figures are in crore rupees (except EPS).
Manali Petrochemicals is a leading producer of Propylene Oxide (PO), Propylene Glycols (PG) and Polyols in India. These products find application in industries such as Pharmaceuticals, Polyurethane, Resins etc. Below are some extracts on the growth prospects from the last annual report of the company:
The polyurethane market has improved considerably in India and is growing in excess of 20%.
The automobile industry is growing phenomenally and India is becoming an export hub. Resulting from the expansion plans of auto companies and other PU industries, the 2nd tier market is expected to double within the next 5 years, and hence the outlook is good for the 3rd tier polyol & isocyanate manufacturers.
Considering the growing demand, the company has more than doubled it’s installed capacity over last 2 years. The capacity has been expanded to 36,000 MT of PO, 20,000 MT of PG and 50,000 MT of Polyols vs 24,000, 13,250 & 14,000 MT respectively. To scale up the capacity utilization the company needs good quantities of PO and has recently tied up to set up storage and handling facility at Ennore Port, Chennai for bulk import of PO. The company is expected to improve capacity utilization at minimal incremental cost and hence the margins may even improve.
The stock is listed both on BSE (500268) & NSE (MANALIPETC) and is quite liquid. Valuations look attractive at CMP of Rs.11.50 :
- The stock is trading at a PE of just 4.50.
- The company is debt free and is expected to continue its growth rate of 15-20%.
- The company has been regularly paying dividends. For FY 12, the company has declared a dividend of 12% on face value of Rs.5 i.e. Rs 0.60/share. The dividend yield works out to be 5%+ at CMP.
- The stock is trading at 1.2 times its book value.
- The company has continuously improved on its financial ratios. The ROCE has improved to 25% for 3 years now.
Given the improving fundamentals and low valuations, it is a safe stock idea at these levels. Investors may accumulate the stock.
Among our existing stock ideas, we feel Oriental Carbon is trading at a very attractive valuations at CMP of 110 and exposure may be increased in it.
Financial Valuations of Manali Petrochemicals: