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Thursday, March 29, 2012

Punjab Alkalies & Chemicals Ltd:Buy/sell/growth prospects and recommendation,news and results,target and analysis,view and outlook,multibagger

Scripscan:Punjab Alkalies & Chemicals Ltd

Story:The company is sitting on capacity of 99,000 tonne, the second largest capacity in caustic soda in India.If I look at the financial of the company, it is into distress for sure because the company is posting negative earnings per share (EPS) for last couple of years Why? This is because they do not have a captive power plant. So, a capacity of one lakh tonne will, if I try to replace with the new plant, cost me close to Rs 350-425 crore.If I take a stance from what has happened in three-four years into the caustic soda space and similar kind of businesses, Meghmani Organics' subsidiary Meghmani Finechem announced the chlor alkali plant for Rs 500 crore odd partnering with international finance corporation for a total of 1.1 lakh tonne. That means for 99,000 tonne, without the power plant, the valuation should come around Rs 270-280 crore.If I trace back Bangladesh event of T.K group, through their subsidiaries, Samudra Chemical, they have actually gone for a Greenfield expansion. The company actually invested 2.1 billion taka for 100 tonne per day. Punjab Alkalies' capacity is 300 tonne per day. If I take 330 working days for the company, that gives me a valuation of Rs 387 crore. By subtracting that Rs 100 crore odd, it gives me Rs 280 crore on a replacement cost basis.Apart from this, if I look into the company's balance sheet, the company is sitting on a freehold land of Rs 30 crore odd and also Rs 20 crore are recoverable in cash and kind in terms of advances. So, if I take all this maths, the total should come around Rs 230 crore odd.The company at present quotes at a marketcap of just 30crs.At some point of time Govt of Punjab would put the company in the block for disinvestment.The stock can really move on to a different orbit provided such news comes.So people having a penchant for this kinda stories may well take a punt.

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