Investment Rationale:
Increase in prices of Caustic soda since Aug 2016 could last for some more quarters benefitting GACL’s margins
In-house R&D, plant and technology up- gradation could help to improve capacity utilization going forward
GACL’s capex plans could help to expand its business going forward
With sound financials, company is on track to significantly improve return ratios
Concerns:
Lower than expected realization of caustic soda
Currency fluctuation risk, High raw material prices,
Economic slowdown, Competition (including dumping from China), Delay in Execution,
The chlorine industry is in a decline stage due to alternate chemicals and cheap resources:
View and Valuation:
GACL’s competitive cost structure with state-of-the-art technology for production and captive power generation to meet part
of its energy requirements along with its comfortable leverage and strong debt coverage indicators could help to improve its
margins going forward in an era of rising caustic soda prices (international prices up almost 50% since Aug 2016). The
European market is expected to remain tight on a fundamental shortage of production on capacity closures (almost half of
capacity) ahead of a December 2017 legislation requirement. Further rising aluminium prices have also led to increased
demand for caustic soda. Apart from this, its capex plans (effect of which will be seen only post 2HFY18) and aggressive
marketing and distribution strategies could help to expand its business across new geographies. The strengths of the
Company are economies of scale, state-of-the-art eco-friendly technologies, extensive usage of renewable energy, integrated
downstream plants, strong network for Marketing and Distribution, In-house Research and Development facilities, proximity
to major raw material source and markets etc.
Increase in prices of Caustic soda since Aug 2016 could last for some more quarters benefitting GACL’s margins
In-house R&D, plant and technology up- gradation could help to improve capacity utilization going forward
GACL’s capex plans could help to expand its business going forward
With sound financials, company is on track to significantly improve return ratios
Concerns:
Lower than expected realization of caustic soda
Currency fluctuation risk, High raw material prices,
Economic slowdown, Competition (including dumping from China), Delay in Execution,
The chlorine industry is in a decline stage due to alternate chemicals and cheap resources:
View and Valuation:
GACL’s competitive cost structure with state-of-the-art technology for production and captive power generation to meet part
of its energy requirements along with its comfortable leverage and strong debt coverage indicators could help to improve its
margins going forward in an era of rising caustic soda prices (international prices up almost 50% since Aug 2016). The
European market is expected to remain tight on a fundamental shortage of production on capacity closures (almost half of
capacity) ahead of a December 2017 legislation requirement. Further rising aluminium prices have also led to increased
demand for caustic soda. Apart from this, its capex plans (effect of which will be seen only post 2HFY18) and aggressive
marketing and distribution strategies could help to expand its business across new geographies. The strengths of the
Company are economies of scale, state-of-the-art eco-friendly technologies, extensive usage of renewable energy, integrated
downstream plants, strong network for Marketing and Distribution, In-house Research and Development facilities, proximity
to major raw material source and markets etc.
Transaction en cours:
Gujalkali hit first target 480 next target 520
Commentaire:
Rocking performance ready for next Breakout