Buy Dhunseri Petro; target of Rs 219: SKP Securities

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Buy Dhunseri Petro; target of Rs 219: SKP Securities

SKP Securities is bullish on Dhunseri Petrochem & Tea and has recommended buy rating on the stock with a target of Rs 219 in its August 5, 2011 research report.

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SKP Securities is bullish on Dhunseri Petrochem & Tea and has recommended buy rating on the stock with a target of Rs 219 in its August 5, 2011 research report.

"Dhunseri Petrochem & Tea Limited is the flagship company of the Kolkata based Dhunseri Group. In the beginning the group had promoted Dhunseri Tea in 1970 and subsequently promoted South Asian Petrochem Ltd in 1999-2000. Subsequently the two groups were merged together into one company and renamed as Dhunseri Petrochem & Tea Limited."

"DPTL is undertaking a massive capacity expansion programme of 210,000 TPA in Haldia, West Bengal in addition to the 200,000 TPA existing capacity there. Developing a 420,000 TPA PET Plant in Egypt through its Egyptian subsidiary where it would be holding 70% equity and the rest would be held by 3 local companies. The demand for PET products from key end user industries as aerated drinks, packaged mineral water, beverages etc, is going to drive up the demand for PET products. These products alone account for about 70%-75% of the total demand for the sector. DPTL has 11 tea estates with a production capacity of 10.5 Mn Kg and has also recently acquired about 4 tea factories. It is on the lookout for more acquisitions and has targeted a production of 20 Mn Kg by FY13-14. With tea prices expected to firm up, the revenues are expected to increase."

"The company has reported an operating cash flow of about Rs 113 cr in FY11 and has a Debt Equity ratio of 0.59x indicating that it shall not face any problem in raising further funds for the expansion plans. We are bullish on a long term basis considering its ambitious expansion plans and have valued the company through the DCF method by taking a WACC of 10.22% from FY12E to FY16E and a terminal growth rate of 2% thereafter and have arrived at a fair price of Rs 219 implying 52% rise from present levels in the next 18 months," says SKP Securities research report.  

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To read the full report click on the attachment