ICI India
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs330
Current market price: Rs285
Strong numbers for quarter
Result highlights
- ICI India reported a strong revenue growth of 25% for Q1FY2006 to Rs215.4 crore year on year (yoy). The growth was achieved on the back of a good growth in the businesses of both paints and chemicals.
- The paint business grew at 24.5% yoy to Rs155 crore owing to an optimised product mix in favour of premium brands, thereby vindicating our assumption of a 25% growth in the business for FY2006.
- The chemical business grew by 25% yoy to Rs89.7 crore, as its new polymer adhesive plant became operational in Q4FY2005 and textile chemicals (surfactants) reported a good growth.
- The company's operating profit grew by 52.4% as the operating profit margin (OPM) expanded by 180 basis points yoy.
- The profit after tax but before exceptional items went up by 37.7% yoy to Rs16.6 crore.
- At the current market price of Rs285 the stock is quoting at an enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 4.4x its FY2007E EBIDTA. We maintain our Buy call on the stock with a price target of Rs330 based on our sum-of-parts valuations.
Deepak Fertilisers & Petrochemicals Corporation
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs126
Current market price: Rs71
Strong quarterly numbers
Result highlights
- Deepak Fertilisers and Petrochemicals Corporation (DFPCL) reported a strong revenue growth for Q1FY2006 at 23.5% year on year (yoy) to Rs138.3 crore on the back of a strong growth in the ammonium nitrate business.
- The ammonium nitrate business grew by 138% yoy on the back of a 93% year-on-year (y-o-y) growth in the volumes and the balance from the growth in realisations. DFPCL has shown intentions of expanding its capacity for ammonium nitrate looking at the supply shortage.
- The operating profit grew by 49.5% as the operating profit margin (OPM) expanded by 480 basis points yoy.
- The profit after tax went up by 72.2% yoy to Rs22.7 crore as the effective tax rate for the quarter was lower.
- DFPCL's expansion plans are well on track with the isopropyl alcohol (IPA) plant expected to go on stream by the end of FY2006.