Buy Ganesh Poly; target of Rs 102: Unicon Investment

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Buy Ganesh Poly; target of Rs 102: Unicon Investment

Unicon Investment is bullish on Ganesh Poly and has recommended buy rating on the stock with a target of Rs 102 in its June 4, 2011 research report.

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Unicon Investment is bullish on Ganesh Poly and has recommended buy rating on the stock with a target of Rs 102 in its June 4, 2011 research report.

"Ganesh Polytex Ltd (GNPL) reported a strong set of numbers, higher than Unicon Estimates. The company has recorded a 93% growth in revenues on a YoY basis while it was up 29.1% sequentially for the quarter under review. For FY11, total operating revenue increased 46% to INR 2.9bn. The increase in revenue was on the back of strong growth in its volumes led by increase in its RPSF (Recycled Polytester Staple Fibre) capacity during the year. EBITDA for the quarter increased 76.5% on a YoY basis while it was up 22.7% on a sequential basis during Q4FY11. EBITDA margin during the quarter was however down 113 bps on an annual basis. This was on account of 286 bps rise in raw material cost as a percentage of sales. For FY11, EBITDA increased by 49% with a 26 bps improvement in margins. Despite a fall in EBITDA margins, net profit for the quarter increased 110% on a YoY basis while it was up 30% on a sequential basis during Q4FY11. PAT margin during the quarter improved by 48 bps on an annual basis. For FY11, PAT has doubled with a 166 bps improvement in margins."

"GNPL was awarded "Silver Shield" for Excellence in Financial Reporting by the Institute of Chartered Accountants of India in January 2011. The Annual Report and Accounts for FY10 were adjudged as the second best amongst the entries received under the Category "Manufacturing Sector -Turnover less than INR 5 billion". The award provides confidence that the accounting policies and practices adopted by the Company are among the best. IFCI Venture Capital Funds, under its Green India Venture Fund, has provided subscribed 1.5 million Optionally Convertible Debentures (OCDs) of INR 90 each of the company on preferential basis. These OCDs can be converted into equal number of equity shares of INR 10 each of the company at a premium of INR 80 per share."

"The company has successfully commissioned this year the new production line of 18000 million tonnes per annum (MTPA) of RPSF at its Rudrapur unit to increase the total capacity to 57,600 MTPA. The company has also announced a capex plan of INR 1.25 bn which will help the company achieve economies of scale and strengthen its margins. At CMP stock is trading at PE of 5.3x FY12e earnings. We have used the discounted cash flow (DCF) method to value GNPL due to the high growth trajectory of the company. We maintain our Mar'12 target price of INR 82 based on a discount rate of 17% and a terminal growth of 2%. The target price implies a potential upside of 65% from current levels and we have a BUY recommendation on the stock," says Unicon Investment research report.  

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To read the full report click on the attachment