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Note: The artciles are not research reports but assimilation of information available on public domain and it should not be treated as a research report.

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Thursday, October 29, 2009

Indian Acrylics Ltd:Penny priced gem/future growth outlook and prospects/news/views/analysis/recomendation

Scripscan:Indian Acrylics Ltd
cmp:5
Code:514165

Story:Acrylic Fibre Industry has taken a big U-Turn in current year. Acrylic Fibre is mainly used for clothes and Acrylic Yarn produced from Acrylic Fibre is warm to manufacture Sweaters, Scarves, T-Shirts, Kids Clothes, Mufflers, Jogging Suits, Socks etc. Its other use for Household Segments for manufacturing Carpets, Blankets, Rugs etc.

Until last year, Acrylic Fibre Industry was suffering heavily due to:

a)Low priced imports in big quantity.
b)All time high price of ACN (which is main Raw Material for making Acrylic Fibre).

However, recently government decided to impose Anti-dumping duty on imports of Acrylic Fibre from China. Simultaneously, ACN prices also dropped heavily in Q4 which, have again gone up in Q1 (but still considerably lower than earlier high price). Consequently, selling price of Acrylic Fibre have gone up by more than 30%. Further, no new capacities have been added in the Industry in last 2 years. Rather, some units of Acrylic Fibre (J.K. Synthetics, IPCL, Consolidated Fibre) have closed down. On the other hand, capacity of user industry has been on the rise. In some, now, Acrylic Fibre manufacturers in India are enjoying Golden period caused by Anti-dumping duty, reasonable Raw Material prices, Sellers Market due to shrinking supplies.

For Acrylic Fibre Industry, April - December is good/peak season. Sales in Jan - March months are on the lower side. There is a strong belief that 10-11 should also be a good year as no new capacities of Acrylic Fibre are coming up.

There are 3 players in Domestic Acrylic Fibre Industry. Indian Acrylics is the largest producer with 40,000 TPA capacity. Pasupati Acrylic is second biggest producer with 30,000 TPA capacity and Vardhman Acrylics has 18,000 TPA capacity. Of late, investors seem to be showing big interest in these scrips as daily traded volumes have risen sharply. These companies have reported turnaround for June Quarter with higher bottomline:

QTR ENDED QTR ENDED
Rs/Cr Rs/Cr

Pasupati Acrylon + 18.04 - 2.89

Indian Acrylics + 5.40 - 6.37

Vardhman Acrylics + 12.41 + 3.35

Conclusion:Plant of Consolidated Fibres is already closed whereas, Plant of J.K. Synthetics became inoperational more than 10 years ago.As against loss of 11.51 crs. in Q2 last year, company will report PAT of 13 crs. for Q2 09-10. Thus, H1 PAT will be Rs. 18 crs. as against loss of 18 crs. in H1 last year. With turnaround of Rs. 36 crs., IAL will be re-rated.Share price can go to Rs. 9/- in short term and chances of 50% appreciation are extremely bright.A great buy altogether.

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