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SENSEX: 73651.35 655.04

NIFTY: 22326.90 203.25

Multi Baggers

Aashish Tater

5.30 AM Jan 1st 1970

SPIC

BSE ID : 590030     NSE ID : SPIC

RECOMMENDED PRICE 9.02

PEAK FROM RECO 93.05 931.60%

CURRENT PRICE 70.27 Resource id #18

SPIC has just started its plant and has been able to conclude 647 crore of sales for September quarter. The value of the plant is 8-10 times higher than current market capitalization which offers tremendous value for the stock.

Southern Petrochemical Industries Corporation (SPIC)

Asset Heavy companies with higher replacement value and M&A activities likely on cards is the key theme for the report.

Now take a valuation call on SPIC:

Capacity UREA 620400 MT 50 percent higher than Mangalore Chemical Fertilizer.

Capacity DAP 606100 MT almost double of Mangalore Chemicals.


The Big Trigger:

Company has just started its plant and has been able to conclude 647 crore of sales for September quarter. The company was refereed to CDR and has come out of it. Now the big trigger is the stock offers deep value post Corporate Debt Re-Structuring and stock pattern suggest the stock is getting accumulated around current levels. On most conservative aspects we feel the stock is going to test 28. Over next one year, especially after the first leasing episode we expect there will be lot of re-org exercise in this group and company will have to sell its business or there will be external threat of takeover from competitors.

The value of the plant is 8-10 times higher than current market capitalization which offers tremendous value for the stock.

Mangalore market cap is 680 crores and SPIC market capitalization is 145 crores. A very simple arithmetic suggest valuation on most conservative estimate for SPIC adjusting for debt stands at 600-700 crores which is roughly 4.5x current market capitalization. Assuming time period lag of two years and our time frame of a year we expect the stock to stabilize around 20. The projected expectation of company arriving at fair value of 28 given it has started its operation is likely achievable over 15 months time frame.

Note this is a deep value stock and is for long term patient investors with favorable risk reward ratio. Since the plant has just got operational. The operating numbers will take one or two quarter to stabilize but by then we expect stock to give 70 percent return from current levels. This is very interesting stock where the business offers great value and management is stuck with other issues similar to what happened with Mangalore Chemicals.

However, one should book profit around Rs 20 about 70-80 percent of the exposure.

Disclaimer: Aashish Tater is an equity analyst and investment consultant based in Kolkata, INDIA. At the time of writing this article, he, his firm and dependent family members have no position in the stocks mentioned above. The author invites readers to send him email and welcomes comments, feedback & queries at query@fortunewizard.com. This report has been prepared solely for information purposes and the information contained herein may not be deemed to be an investment advice. Such information is impersonal and not tailored to the investment needs of any specific person. The information contained herein is not a complete analysis of every material fact representing any company, industry or security. The views expressed may change. While the information contained herein has been obtained from sources believed to be reliable, no responsibility (or liability) is accepted for the accuracy of its contents. Investors are advised to satisfy themselves before making any investments and should consult with and rely upon their own advisors whether and how to use such information in making any investment decision. Neither the author nor his firm accepts any liability arising out of use of the above information/ article.

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