Buy Recommendation with 35% Upside of the Stock Price
National Peroxide is a joint venture company between Wadia Group and Solvay and is a pioneer in India for peroxygen chemicals and is the largest manufacturer of Hydrogen Peroxide with an installed capacity of 49,000 TPA on 50% w/w basis. Its fully integrated manufacturing facilities are located at Kalyan, an eastern suburb of Mumbai.
- Hydrogen Peroxide is a highly versatile chemical used in various industries for bleaching, chemical synthesis, environment control/effluent treatment, sterilization etc.
- The paid-up equity of the company is Rs.5.75 crores, with face value of Rs.10 each. Of this, promoter’s stake is 65% (of which 39% is held by Wadias of Bombay Dyeing while 26% is held by Solvay) and 35% by the public.
- The company has recently expanded its capacity and its plant operated at 107% of rated capacity in FY 08 which has resulted in improved working.
- For FY 08, the total income of the company rose to Rs.110 crores against Rs.65 crores of FY 07. FY 08 EBITDA was at Rs.28 crores, resulting in a margin of 25.50% against EBITDA of Rs.14 crores for FY 07, resulting in a margin of 22%. Increase in capacity and capacity utilization coupled with improvement in EBITDA margin has been instrumental for improved working.
- FY 08 had an EPS of Rs.19 against Rs.8 for FY 07, while a dividend of 80% is declared for FY 08 by the Board of the company.
- Book value per share as at 31-03-08 is at Rs.100 which is also quite comforting.
- Due to better realization of the product, FY 09 is likely to have an EPS of over Rs.20.
- Share is presently ruling at Rs.198, which had a 52-week high of Rs.355 made on 1st Jan. 2008. The present market price discounts historic earning by about 11 times which may improve in due course of time, with tracking of results of this relatively unknown company.
- Share is recommended a good buy at Rs.198 (which had a 52-week low of Rs.155), which has potential to move upto Rs.300 in the next 8 – 10 months
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