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Sunday, September 13, 2009

Manali Petrochemical Ltd:Future growth prospects and outlook

Scripscan:Manali Petrochemical Ltd

Story:Manali Petrochemicals Ltd was promoted by Southern Petrochemicals Industries Corporation (SPIC) in 1986, with promoters' stake being at 44.81 % with remaining shares held by about 1,60,000 shareholders. The two plants of the company are located at Manali , outskirts of Chennai and close to the plants of Chennai Petroleum Corporation from where it sources its major raw material Propylene through a pipeline. Chlorine another major raw-material is sourced from Tamilnadu Petroproducts Ltd., adjacent to its plant, and a group company. Lime, other raw material is sourced from the nearby markets as also imported.The company has technical collaboration with ATO Chem (France), Arco (USA), Technip (France) and Montedip (Spain).The company also supplies Methylene Di Iscocyanates (MDI) a complimentary product for the Polyol, by importing it from Japan. Due to over 100 % rise in the prices of MDI in the international markets, and shortage, it posed a serious threat to Polyol users. However , company reformulated the products for use with alternate Iscocyanates and stabilized sales profitability. The company supplies MDI and Polyols to Polyurethane (PU) industry as also provides technical services to user industry. The company is the only producer of Polyols in India which is a highly technology and capital intensive.PU is a versatile and durable polymer finds use in diverse applications. Flexible PU is used in bedding, carpet underlay, acoustic and mattresses while rigid PU is used for insulation and is widely used in all refrigerators, thermoware, pipe section, panels, engg. components, auto interior trims etc. The moduled variety is used to manufacture auto cushion seats, pillow, bicycle seats etc. Elastomer Grade Polyol is used in the tubeless cycle tyres, rice mill rollers, coatings, sealants, adhesive, shoe sole etc. Polyols is also combined with some supplementary products to produce high margin speciality products.Propylene glycol is manufactured to IP/USP specifications and finds extensive use in Pharma preparations, food flavours, cigarettes, paints, cosmetics etc. The by-products Di and Tri Propylene Glycol finds extensive use in the resin industry and manufacturing of Fat-G-bricks - an energy conserving building material.Due to huge demand of the company's products, in various industries, which has great future and good growth, and the company being the monopoly producer in India, can reap benefits by expansion and better margins.The share should rule at a higher price looking to its product profile, hence can reach a level of Rs. 12-14 in next 12 months.The share is presently ruling at Rs.8-9 which makes it a safe buy for an annualised returns of over 25-50% per cent in the next one year.

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