Buy India Glycols, target of Rs 535: PINC

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Buy India Glycols, target of Rs 535: PINC

PINC Research has recommended a buy rating on India Glycols with a 12-month price target of Rs 535. IGL’s manufacturing prowess affords it strong flexibility in swinging to the cheapest feedstock i.e. sugarcane, ethanol or molasses.

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PINC Research has recommended a buy rating on India Glycols with a 12-month price target of Rs 535 in its June 3, 2008 research report. "IGL's manufacturing prowess affords it strong flexibility in swinging to the cheapest feedstock i.e. sugarcane, ethanol or molasses. This, coupled with the altering product mix towards EO derivatives imparts huge operating leverage for the company and can propel its profitability sharply (as illustrated in the sensitivity table below). Considering the sugar cycle (and thereby sugarcane prices), softening international ethanol prices (imports at a landed cost of Rs18.5/litre being a viable proposition) and the huge storage facility of molasses and ethanol that afford it strong buffer capacity, the earnings stream of the company is expected to turn more predictable and less cyclical."

"Thus, we believe that valuation metrics would improve from low, single digit P/E multiples and align with other commodity players. At the CMP of Rs 285, IGL is trading at EV/EBITDA of 2.3x and P/E of 2.7x FY10 estimates. Considering the strengths in its business model, synergies across its various operations and diversified revenue stream, we recommend a 'BUY' with a 12-month price target of Rs 535," says PINC's research report.

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