Recommendations From Commodity Chemicals

This section gives a recommendation of a stock having stock margin padding price below Rs 100 with sound fundamentals and expected to give handsome returns over a one-year time horizon

GULSHAN POLYOLS 

BACK ON THE GROWTH TRACK!

BSE Code:532457
CMP: Rs. 58.80
FV: Rs.1
BSE Volume:2411 

HERE IS WHY Improving financials Strong clientele Capacity expansion

Gulshan Polyols Limited (GPL) is a multi-product manufacturing company and a market leader in many of its products in India. The company has a global presence in 35 countries across three continents. Its business portfolio covers starch sugars and native starches, calcium carbonate; agro-based animal feed, alcohol business and onsite PCC plants.

The company provides solutions to diverse range of industries and niche markets in the core sector, i.e. from toothpaste to alcohol, sweeteners to paints, paper to medicines and plastics to personal care. The company has an impressive clientele, including Colgate, Palmolive, Hindustan Unilever Ltd, Asian Paints, among others.

The company has product certification from Germany and has started exporting to the US and Australia. After the commencement of two plants, the company's sale of byproducts of grain-based business is likely to double by FY19.

GPL is planning to expand corn production capacity, which is a raw material used in the main product Sorbitol, by 25 per cent to 100K MTPA. GPL has also entered into grain-based ENA plant, which has a high entry barrier.

Further, the company is targeting a turnover of around Rs.1,100 crore in FY19, out of which about 90 per cent would be from grain-based corn and rice.

On the financial front, GPL posted a 3.65 per cent hike in its net sales to Rs.166.8 crore in the first quarter of FY19 as compared to Rs.160.93 crore in the same quarter of the previous year. The company's PBDT increased by 84.05 per cent to Rs.21.46 crore in the first quarter of FY19 on a year-on-year basis. Also, the net profit of the company increased by about 60 per cent to Rs.6.51 crore in the first quarter of FY19 as compared to Rs.4.07 crore in the same quarter of the previous fiscal.

The net profit margin stood at 4 per cent as against 3 per cent in the same quarter last year. The EPS for the quarter stood at Rs.1.39.

On an annual basis, the company posted a 23.86 per cent increase in its net sales to Rs.624.04 crore in FY18 as compared to Rs. 503.81 crore in FY17. The PBDT of the company increased by over 1.9 per cent to Rs.60.03 crore in FY18 as against Rs.58.9 crore in FY17. The company posted a decline of 34.65 per cent in the net profit to Rs.18.24 crore in FY18 as compared to Rs.27.91 crore in FY17.

On the valuation front, the company has a price-to-earnings ratio of 13.12x. It has posted return on equity (ROE) of 11.28 per cent and return on capital employed (ROCE) of 11.03 per cent. The company has a debt-to-equity ratio of 0.6x. The stock is trading at 0.98 times its book value.

With improvement on the operational front, GPL is strongly back on track. We recommend our reader-investors to BUY the stock.