Buy Adi Finechem; target of Rs 80: Firstcall Research

“The Company was incorporated as a public limited Company on May 25th, 1985 under the name H.K. Agro Oil Ltd. The Company was incorporated in May, 1985 with an objective to deal in edible grade oil. As well-known, Gujarat is a major centre for edible grade oil. It was found on detailed study that the available technology was not very attractive and lot of effort in terms of time and money was required for creating 'brand equity' of edible Rice Brain Oil. The objective of manufacturing edible grade oil was put on hold till better and improved technology.”

“Adi Finechem Ltd is an oleo chemical company is engaged in manufacture of specialized products for neutraceutical industry, reported its financial results for the quarter ended 30th June, 2012. The first quarter witness a healthy increase in overall sales as well as profitability of the company. The company’s net profit jumps to Rs.30.29 million against Rs.28.86 million in the corresponding quarter ending of previous year, an increase of 4.95%. Revenue for the quarter rose 42.44% to Rs.342.63 million from Rs.240.54 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.3.19 a share during the quarter, registering 4.95% increase over previous year period. Profit before interest, depreciation and tax is Rs.56.66 millions as against Rs.48.54 millions in the corresponding period of the previous year.”

“During the quarter Total Expenditure rose by 52 per cent mainly on account of increase in Power & Fuel along with consideration of depreciation in the rupee impact. Total expenditure in Q1 FY13 was at 298.88 million as against Rs.196.79 million in Q1FY12.Consumption of Raw Material Rs.245.81 against Rs.149.55 millions in the corresponding period of the previous year. Other Expenditure was at Rs. 13.74 million and Employee Cost is Rs. 10.73 million in Q1FY13 are the primarily attributable to growth of expenditure.”
 
"At the current market price of Rs.70.00, the stock P/E ratio is at 7.44 x FY13E and 5.92 x FY14E respectively. Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.9.41 and Rs.11.83 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 37% and 30% over 2011 to 2014E respectively. On the basis of EV/EBITDA, the stock trades at 3.67 x for FY13E and 3.01 x for FY14E. Price to Book Value of the stock is expected to be at 2.03 x and 1.51 x respectively for FY13E and FY14E. We expect that the company surplus scenario is likely to continue for the next years, will keep its growth story in the coming quarters also. We recommend buy in this particular scrip with a target price of Rs.80.00 for Medium to Long term investment,” says Firstcall Research report.

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