Equity Watch

Supreme Petrochem,a world class Styrenics complex in next 5 years

Supreme Petro SPL has a capacity of 300.000 TPA of various grades of Polystyrene,namely General Purpose Polystyrene  GPPS , High Impact Grade Polystyrene HIPS, expandable polystyrene and various other grades.Its the biggest plant in India and among the top 6 plants globally with 2% of global installed capacity at one location.In India it has a market share of 55% and is the largest exporter of PS with more than 100.000 TPA of exports to 80 countries.Polystyrene is used extensively in Consumer Electronics, White goods, domestic appliances, food packaging,food serviceware,household wares,stationary,toys films etc.

Some time back SPL signed a Memorandum of Understanding (MoU) with the Government of Maharashtra under the aegis of Industries Ministry for its Rs 1115 crore, proposed additional capital expenditure program to build a world-class styrenics complex by the year 2012 at its existing plant site at village Amdoshi and a minor Port at village Dherand, both in district Raigad. With the additional investment, the Company will be One – Stop – Shop for the entire chain of styrenic polymers and alloys of polymers. The Minor Port will address the logistic costs and permit movement of materials away from urban areas.Total additional quantity produced by the proposed projects will be 4.9 lakh tons thus bringing the overall capacity to about 8 lakh TPA or 5% of total Global Capacity at one location. The Company is also expanding its compounding facilities to add alloys of Polymers and other value added products. The Company has adequate land and support infrastructure at its existing plant location.

 SPL is ISO 9001-2000, ISO 14001-1996 and OHSAS1800-1999 certified company with Technical know-how from NOVA CHEMICALS USA and Engg. by LUMMUS CREST USA.Lately its Financial peformance is also improving:

Scrip Code : 500405    Company Name : Supreme Petrochem Ltd
Type Audited UnAudited UnAudited UnAudited Audited
Date Begin 01 Apr 07 01 Jan 07 01 Oct 06 01 Jul 06 01 Apr 06
Date End 30 Jun 07 31 Mar 07 31 Dec 06 30 Sep 06 30 Jun 06
Description Value(Rs. million)
Gross Sales 4079.55 4163.51 4025.92 3843.53 3810.61
Excise Duty -316.87 -309.84 -271.37 -263.83 -304.61
Net Sales 3762.68 3853.67 3754.56 3579.7 3506
Other Income 41.41 18.23 20.37 3.79 27.57
Total Income 3804.09 3871.89 3774.93 3583.5 3533.57
Expenditure -3545.17 -3635.87 -3608.59 -3394.12 -3415.69
Operating Profit 258.93 236.03 166.34 189.38 117.88
Interest -55.57 -50.12 -48.63 -53.01 -51.85
Gross Profit 203.35 185.91 117.71 136.37 66.03
Depreciation -42.86 -42.87 -42.33 -42.24 -41.83
Profit before Tax 160.49 143.04 75.39 94.13 24.2
Tax -39.73 -51.4 -26.13 -24.21 12.65
Profit after Tax 120.77 91.64 49.26 69.92 36.85
Extraordinary Items 0.67
Net Profit 120.77 91.64 49.26 69.92 37.52
Equity Capital 975.13 975.13 975.13 975.13 975.13
EPS 1.24 0.94 0.51 0.72 0.38
Nos. of Shares – Non Promoters 39636000 39636000 39636000 39636000 36998799
Percent of Shares – Non Promoters 40.65 40.65 40.65 40.65 37.94
Result Type Q Q Q Q Q
  Notes Notes

    Financials reproduced from BSEINDIA

Equity capital is Rs. 97.5 crores and at CMP of Rs. 25 its market capitalisation comes to Rs 245 crores.The company has big plans with investment of more than 4 times its present market cap. and within 5 years SPL could well be among the top 3 global companies. At present the share is available at P/E of say 6 .Next year will be the first full year of production at expanded capacity and SPL is likely to show much better performance compared to the last Q ended June 2007, especially as the GDP is likely to grow at  more than 8% and Polystyrene  prices are going up globally because of increasing demand. See here   Prices are likely to go up further. On the raw material front SPL has tied up with a few big Singapore based companies for long term supply of Styrene Monomer (SM.)Under the Free Trade Agreement with Govt. of Singapore company does not have to pay Customs duty on SM when imported from Singapore.Company’s margins are better from exports of PS as the PS prices take into account the Styrene monomer prices more like the Gross Refinery Margins in Crude Oil Refining company. Here we can call it Gross Polymerisation Margins  or GPM  which has PS price – SM price -processing cost.PS prices going up augurs very well for the Company.

SPL has huge land bank at Raigad,an Industry hub in Maharashtra. Its value in the books is stated at Rs. 17 crores. However today’s value could be atleast 10 times the book value. Also its owned buildings are valued at Rs. 83 crores in the books which could have also gone up substantially.With the port facilities in Raigad, and a state of the art plant with economic capacities, big expansion plans on the cards, rising product prices, future for the company looks very bright.

BUY at CMP of Rs. 24.5 is recommended with atleast 2 year HOLD.Share is a multibagger with a target of Rs. 100.

This report has been prepared solely for information purposes and the information contained herein may not be deemed to be an investment advice. Such information is impersonal and not tailored to the investment needs of any specific person. The information contained herein is not a complete analysis of every material fact representing any company, industry or security. The views expressed may change. While the information contained herein has been obtained from sources believed to be reliable, no responsibility (or liability) is accepted for the accuracy of its contents. Investors are advised to satisfy themselves before making any investments and should consult with and rely upon their own advisors whether and how to use such information in making any investment decision. Neither the author nor his firm accepts any liability arising out of use of the above information/ article


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