Multi Baggers

Ventura Securities

5.30 AM Jan 1st 1970

Pondy Oxides

BSE ID : 532626 NSE ID : POCL

RECOMMENDED PRICE 47.30

PEAK FROM RECO 684.40 1,346.93%

CURRENT PRICE 700.00 Resource id #12

Pondy Oxides is engaged in the manufacturing of metals, primarily lead and zinc, metallic oxides and plastic additives. We initiate coverage on POCL as a BUY with a price objective of Rs 88.

Pondy Oxides & Chemicals Ltd

Incorporated in 1995, Pondy Oxides & Chemicals Ltd (POCL) is engaged in the manufacturing of metals, primarily lead and zinc, metallic oxides and plastic additives. Its manufacturing units are located in Tamil Nadu and Pondicherry, with one greenfield unit under construction in Andhra Pradesh. POCL is a secondary smelter, i.e. it manufactures/recycles lead from metal scrap and ores.

POCL, a manufacturer of lead metals, oxides and plastic additives, is undertaking a restructuring exercise by demerging its oxides and plastic additives segments, which account for 30 percent of FY14 revenues, to a separate entity - POCL Enterprises Ltd (PEL). We believe that a concentrated focus on each business unit will drive operational efficiencies going forward. Also, we are optimistic about the future prospects of the company given that:

The demand for industrial batteries will remain strong given the world-wide impetus on solar energy. Also, the back-up power demand in India could grow on power supply bottlenecks and increasing industrialization.

India clocks 3 mn vehicle sales annually which are expected to grow at a 9-10 percent CAGR. Also, around 70 mn units are sold globally at a CAGR of 6 percent. Replacement demand is expected to remain robust as automotive batteries are replaced every 2-3 years depending on usage.

Doubling of capacities to approx 57,000 TPA will provide a fillip to revenue growth. Further the greenfield plant is being set up in Andhra Pradesh, close to Amara Raja Batteries' unit, which is its largest domestic customer.

POCL has moved to sourcing based on flexible pricing thereby cushioning itself from volatility in lead prices leading to stable margins.

POCL's operations are fuel intensive and the drop in crude oil prices could help margin expansion.

We expect POCL (combined entity) to report a 20 percent CAGR in revenues to Rs 791 crore by FY17. The EBITDA margin will remain stable at approx 4.5 percent and the PAT is expected to grow at a CAGR of 77 percent to Rs 16 crore by FY17. We initiate coverage on POCL as a BUY with a Price Objective of Rs 88 which represents a potential upside of 87 percent over a period of 24 months.

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PondyOxides_Multibagger_Ventura.pdf