Equity Watch

Laffan Petrochemicals could be a safe bet in difficult times

Laffan Petrochemicals LPL (an ISO 9001-2000 Company) was  set up in 1994 to manufacture ethylene oxide (EO )derivatives such as Ethoxylates, Propoxylates, Glycol Ethers, Acetates, Ethanol Amine, and Brake fluids is located in Ankleshwar, Gujarat. It has technical collaboration with AKZO Nobel.

The plant set up under technical assistance of Reliance Industries  is in proximity to EO supply from Reliance, Hazira. This ensures uninterrupted supply of its basic feedstock which cannot be imported due to its hazardous nature. LPL maintains its own fleet of specially fabricated EO tankers, and is currently the largest buyer of Ethylene Oxide in the Country.

The unit has commissioned India’s largest loop reactor with state – of the – art – controlled system from ROSE MOUNT for consistent quality, This multipurpose unit is geared to produce Polyethylene Glycols and EO condensates of Alkyl Phenols, Fatty Alcohols, Fatty Acids and Natural Oils. Some of its products are :

The unit has expanded its Glycol Ethers and Acetates capacity from 15,000 to 30,000 TPA. LPL is the only Butyl Glycol and Methyl Glycol manufacturer in India along with their respective acetates. LPL also produces ‘THEIC’-(based on BASF process know how),-a unique Surfactant for the wire enameling industry.

On the Financial  front, so far the margins were not consistent, as the Raw material prices fluctuate and the increased product prices can not be passed on to the consumer, because of the long term rate contracts. However with increased capacity and rise in domestic demand, margins are expected to stabilise and rise significantly.

Scrip Code : 524522    Company Name : Laffans Petrochemicals Ltd

Type UnAudited UnAudited UnAudited UnAudited UnAudited Audited
Period Ending 30 Sep 07 30 Jun 07 31 Mar 07 31 Dec 06 30 Sep 06 31 Mar 07
No Of Months 3 3 3 3 3 12
Description Value(Rs. million)
Net Sales / Interest Earned / Operating Income 428.36 415.32 334.82 442.35 426.75 1,424.06
Other Income 0.86 2.64 0.15 2.79 4.64 9.27
Total Income 429.22 417.96 334.97 445.14 431.39 1,433.32
Expenditure -405.11 -396.23 -317.14 -423.62 -414.53 -1,357.99
Operating Profit 24.11 21.73 17.83 21.52 16.85 75.34
Interest -7.65 -6.90 -6.19 -2.41 -1.68 -11.95
Profit Before Depreciation and Tax 16.46 14.82 11.64 19.11 15.17 63.39
Depreciation -3.88 -3.21 -2.38 -3.61 -3.51 -12.56
Profit before Tax 12.58 11.62 9.26 15.50 11.66 50.82
Tax -4.55 -1.40 -13.73 -5.38 -3.98 -17.50
Net Profit 8.03 10.22 -4.47 10.12 7.69 33.32
Equity Capital 80.00 80.00 80.00 80.00 80.00 80.00
Basic And Diluted EPS after Extraordinary item 1.00 1.48 1.26 0.96 3.19
Operating Profit Margin 5.63 5.23 5.33 4.86 3.95 5.29
Net Profit Margin 1.87 2.46 -1.34 2.29 1.80 2.34
Cash EPS
  Notes Notes

Financials reproduced from BSEINDIA

LPL’s equity is  Rs. 8 crores and at CMP of Rs. 20 ,market capitalisation is only Rs. 16 crores. With top line of Rs. 160 crores, and expected EBIDTA of Rs. 8 crores for FY08 and Rs. 16 crores for FY 09, share is highly underpriced and is a screaming BUY .Expect an EPS of Rs.4.5 for FY08 and Rs.9 for FY 09 .The share is available at P/E of less than 5. 

BUY at CMP of Rs. 20 with 2 years HOLD is recommended to see a price 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

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