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Multi Baggers

Hem Securities

12.00 AM Sep 20th 2016

Guj Heavy Chem

BSE ID : 500171     NSE ID : GHCL

RECOMMENDED PRICE 253.00

PEAK FROM RECO 298.80 18.10%

CURRENT PRICE 247.40 2.21%

Gujarat Heavy Chemicals has established itself as a well-diversified group with an ascertained footprint in Chemicals, Textiles and Consumer Products segment. We initiate a 'BUY' on the stock with a target price of Rs 310 with the medium to long term investment horizon.

Gujarat Heavy Chemicals

Gujarat Heavy Chemicals has established itself as a well-diversified group with an ascertained footprint in Chemicals, Textiles and Consumer Products segment. We initiate a 'BUY' on the stock with a target price of Rs 310 with the medium to long term investment horizon.

GHCL has established itself as a well-diversified group with an ascertained footprint in Chemicals, Textiles and Consumer Products segment.

The company has registered decent results for the quarter ending June 2016. The standalone revenues grew by 17.56% to Rs.684.82 crores vs. Rs.582.52 cr. in the year ago quarter. Operating profit grew at Rs.193.34 crores as against Rs.150.75 crores in the corresponding quarter last year; representing growth of 28.25%. The adjusted net profit surged sharply at Rs.102.83 crore as against Rs.75.13 crore, depicting a sharp growth of ~37% y-o-y.

The inorganic chemical segment revenue grew from Rs.384 crores to Rs. 421 crores which is mainly due to higher Soda Ash volume of 23300 tonnes. The margin improvement in the quarter is on account of increased productivity, strong focus on operational efficiency and lower utility cost.

The textile segment reported a 30% surge in the revenue at Rs.313 crores from Rs.241 crores during the last year same quarter and the EBITDA has increased significantly by 47% that is to 50 Crores from 34 Crores in Q1 FY2016. This improved performance is contributed by capacity optimization to 81% compared to 76% in the last year quarter. The per meter realization from home textile business has improved from Rs.254 per meter last year same quarter to Rs.293 per meter in Q1FY17. The volume too has increased from 64 lakh meter last year same quarter to 76 lakh meter in Q1FY17.

Valuation

With cost leadership with stable volumes in the soda ash business, capacity expansion, focus on improving margins of textile business, entry in new markets and adding new products; GHCL growth prospects looks promising. We believe the company is trading at an attractive valuation at 7.93x and 6.86x of consolidated FY17EPS of Rs.31.9 and FY18EPS of Rs 36.90. We initiate a 'BUY' on the stock with a target price of Rs.310 (appreciation of about 23%) with the medium to long term investment horizon.

For full details, Click on the attachment.

Disclosure of Interest Statement - Company Name

1. Analyst Ownership of the Stock - No

2. Hem & its Group Company Ownership of the Stock - Yes

3. Hem & its Group Companies’ Director Ownership of the Stock - Yes

4. Broking relationship with company covered - No

 

Disclaimer & Disclosure: This document is prepared for our clients only, on the basis of publicly available information and other sources believed to be reliable. Whilst we are not soliciting any action based on this information, all care has been taken to ensure that the facts are accurate, fair and reasonable. This information is not intended as an offer or solicitation for the purchase or sell of any financial instrument and at any point should not be considered as an investment advise. Reader is requested to rely on his own decision and may take independent professional advise before investing. Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited, Directors and any of its employees shall not be responsible for the content. The person accessing this information specifically agrees to exempt Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and further agrees to hold Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays. The companies and its affiliates, officers, directors, and employees, including persons involved in the preparation or issuance of this material may from time to time, have long or short positions in, and buy or sell the securities there of, company (ies) mentioned here in and the same have acted upon or used the information prior to, or immediately following the publication. Analyst Certification: The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.

GHCL_HemSec_PYTpdf

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