Scripscan:National Peroxide Ltd
cmp:470
Code:500298
Story:National Peroxide Ltd (NPL) makes hydrogen peroxide, sodium perborate and peracetic acid. Established in 1954, NPL is one of the largest manufacturers of hydrogen peroxide in India. The company currently commands a market share of around 40% in the hydrogen peroxide market. The Mumbai-based company has its fully-integrated manufacturing plant for hydrogen peroxide at Kalyan, on the outskirts of Mumbai. Hydrogen peroxide is used for bleaching, chemical synthesis, effluent treatment, sterilisation, etc, in paper & pulp industries, followed by cotton textiles. Besides, there is a growing demand for water-treatment applications. Hydrogen peroxide is an environment-friendly agent. NPL’s competitors include Amines & Plasticizers, Asian Peroxide (unlisted), Gujarat Alkalies and Chemicals, Hindustan Organic Chemicals, Sree Rayalaseema Hi-Strength Hypo Ltd and Tata Chemicals.The company has gradually increased the production capacity of hydrogen peroxide at its Kalyan plant from about 30,000 metric tonnes per annum (mtpa) in March 2004 to around 65,000mtpa (50% concentrated) in March 2010. It has further started expanding the production capacity of its plant to 84,000mtpa and is investing Rs46 crore for this through internal accruals. NPL has chalked out plans to expand capacity to 1,50,000mtpa over the next five years. The financial performance is set to improve further on the back of expanded capacities.Until December 2009, NPL did not have long-term supply agreements for natural gas—feedstock for hydrogen peroxide—so the company was purchasing natural gas on a spot basis. In January 2010, NPL signed a long-term gas supply agreement with GAIL (India) which has ensured steady supply of feedstock at a predefined structure and brought down NPL’s costs considerably.For the financial year ended 31 March 2011, NPL reported a net profit of Rs58.17 crore against Rs16.38 crore in FY09-10. In the same period, its total income increased to Rs182.96 crore from Rs122.45 crore, while its net revenues grew to Rs181.63 crore from Rs121.90 crore. Compared to the net-worth of Rs128.73 crore in FY10-11, NPL has loan funds of just Rs8.85 crore which means the company has minimal dependence on external funds. In FY10-11, its earnings per share (EPS) stood at Rs101.23 compared to Rs28.52 in FY09-10. The company has recommended a dividend of Rs12 per equity share of Rs10 each (120%) for FY10-11.Its average operating margin is 46% and return on net worth is a superb 45%. Its market-cap to revenues is just 1.3, while its market-cap to operating profit is 2 odd times.The stock is an attractive buy at the current market price, given its market dominance and growth prospects.
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