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Wednesday, September 5, 2012

Kothari Petrochemicals Ltd:Buy/sell/growth prospect and recommendation,news and results,target and analysis,view and outlook,multibagger

Scripscan:Kothari Petrochemicals Ltd

Story:Kothari Petrochemicals Limited (KPL) maintains its 'single largest Poly IsoButene (PIB) manufacturer in India' status with an annual installed capacity of 22,000 Tons. Due to its continued efforts for the improvement of quality and manufacturing process discipline, the company could enter into different customer segments in domestic as well as International market.KPL produces high quality PIB of various grades using Iso Butylen rich LPG which is sourced from Refineries.KPL's flexibility to manufacture various grades in a single location, has established its credibility in the global market by prompt supply of various grades to meet customer's requirements.The heavy swing of International Crude Oil prices and the Exchange rate pushed the raw material suppliers to adopt an unclear pricing policy towards PIB manufacturers which has put KPL in a difficult situation to predict the raw material price movement.In order to be competitive in the global market, KPL is under pressure to match the long credit periods for their customers in line with the competitors offer and thus take the additional burden of interest on working capital and related financial costs.To mitigate the financial risks in global business, KPL as a strategy has covered its exports under a comprehensive ECGC policy.KPL also takes forward foreign exchange cover to hedge against forex fluctuations.Duty Entitlement Pass Book (DEPB), one of the export benefits for PIB export has been withdrawn by Indian Government,which is a setback.The company had identified another source for the raw material in the Eastern part of India and started buying the same from February 2012 onwards. The Company is also continuing the efforts to further explore other sources for the raw material within the country as well as overseas.As a result of its continuous efforts taken to explore the new markets for PIB,apart from the regular usage of PIB in lubricants and additives,the company has started servicing new customer segment like Plastic Master Batch at a better price.KPL has been awarded the contract to supply PIB by British Petroleum (BP) for their Indonesia, China, Vietnam, Saudi & Malaysia lube manufacturing plants.Net profit of Kothari Petrochemicals declined 42.64% to Rs 1.48 crore in the quarter ended June 2012 as against Rs 2.58 crore during the previous quarter ended June 2011. Sales rose 6.83% to Rs 50.18 crore in the quarter ended June 2012 as against Rs 46.97 crore during the previous quarter ended June 2011.The company last year deliverd an EPS of about 65 paisa and this year too it expects the same to be in similar range.One can hold on to the counter as of now(it pays a good dividend yield of 6%,i.e,0 paisa per share) to exit at rallies and move on to something better having a better business and prospects to play with.

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