Anand Rathi posts buy on India Glycols; target Rs 400/500
Anand Rathi Financial Services has recommended 'strong buy' on India Glycols for target price ranging between Rs 400-500.
By INDIATIMES NEWS NETWORK |
MUMBAI: Anand Rathi Financial Services has recommended 'strong buy' on India Glycols for target price ranging between Rs 400-500. The company manufactures ethylene oxide and monoethylene glycol through the agro route, using molasses. It makes a range of products - ethanol, ena, glycols, glycol ethers, ethoxylates, esters and range of performance chemicals. It also manufactures products like - guar gum powder and industrial gases.
To improve raw material security, India Glycols has commissioned a RAB facility to produce molasses directly from sugarcane juice and reduce dependence on sugar factories. The company has manufacturing facility in Kashipur, Uttaranchal, which is a hub of the sugar industry.
Monoethylene glycol is key ingredient to make any kind of polyster (fibre, yarn, film, chips etc), and its price moves with that of crude oil. So, high oil prices is a boon for the company as it pushes the price of MEG. The company benefits from the molasses route as its cost of production is significantly lower than other producers who make it from crude. The MEG capacity has also been expanded in recent past.
Since the last one year oil prices are rising, leading to significant rise in MEG prices (from $880 in March'07 to $1500 in third quarter and $1200 now), this is boosting profit margins of the company, says the brokerage.
Further, the company is derisking the business by putting more focus on making a range of EO derivatives and performance chemicals for various industries through technology tie ups and also internal R&D. The performance of the company will improve significantly in 2008, and will be still better in 2009, when Anand Rathi expects the company to show earning per share close to 90-100. Stock is available at dirt cheap valuations and one can buy for short term as well as medium around current levels, says the brokerage.
As per the charts, after a peak of Rs 510 in Jan'08, the stock fell sharply in recent meltdown in market. The stock is right now available at Rs 300 or so and is showing signs of recovery in weekly technical chart. It has bottomed out and is looking to test Rs 400 levels soon, and once it crosses this level, one can look for next target close to Rs 500. Traders can keep stop loss of Rs 270 for now and keep raising stop loss with price rise.
The company's latest results and latest trend in MEG prices, indicates that the full year profits and EPS for March'08 will be "superb". The estimated March'08 profit after tax and earning per share is Rs 210 crore and Rs 75 respectively; this makes stock very attractive around current prices, says Anand Rathi.
To improve raw material security, India Glycols has commissioned a RAB facility to produce molasses directly from sugarcane juice and reduce dependence on sugar factories. The company has manufacturing facility in Kashipur, Uttaranchal, which is a hub of the sugar industry.
Monoethylene glycol is key ingredient to make any kind of polyster (fibre, yarn, film, chips etc), and its price moves with that of crude oil. So, high oil prices is a boon for the company as it pushes the price of MEG. The company benefits from the molasses route as its cost of production is significantly lower than other producers who make it from crude. The MEG capacity has also been expanded in recent past.
Since the last one year oil prices are rising, leading to significant rise in MEG prices (from $880 in March'07 to $1500 in third quarter and $1200 now), this is boosting profit margins of the company, says the brokerage.
Further, the company is derisking the business by putting more focus on making a range of EO derivatives and performance chemicals for various industries through technology tie ups and also internal R&D. The performance of the company will improve significantly in 2008, and will be still better in 2009, when Anand Rathi expects the company to show earning per share close to 90-100. Stock is available at dirt cheap valuations and one can buy for short term as well as medium around current levels, says the brokerage.
As per the charts, after a peak of Rs 510 in Jan'08, the stock fell sharply in recent meltdown in market. The stock is right now available at Rs 300 or so and is showing signs of recovery in weekly technical chart. It has bottomed out and is looking to test Rs 400 levels soon, and once it crosses this level, one can look for next target close to Rs 500. Traders can keep stop loss of Rs 270 for now and keep raising stop loss with price rise.
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The company's latest results and latest trend in MEG prices, indicates that the full year profits and EPS for March'08 will be "superb". The estimated March'08 profit after tax and earning per share is Rs 210 crore and Rs 75 respectively; this makes stock very attractive around current prices, says Anand Rathi.
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