Laffans Petro Ltd (LPL) was originally incorporated in 1991 in Maharashtra and was converted into a public limited company in 1992. Later, it shifted its registered office to Gujarat. It manufactures ethylene oxide derivatives such as Ethoxylates, Glycol Ethers, Acetates, Triethonal-amine and Brake fluids and sells it under the brand name ‘Laffcols’. It also produces speciality chemicals like surfactants (based on fatty alcohol), polyethylene glycols etc. Company’s products find application in a number of industries including chemicals, refineries, adhesives, ceramics, cosmetics, leather processing, pharmaceuticals, textiles, inks, paints, lubricants and paper. Its major customers include Goodlass Nerolac, Jenson & Nicholson, Berger Paints, Asian Paints, Castrol, Kalyani Brakes, Pidilite Industries to name a few.
LPL’s manufacturing plant located in GIDC at Panoli in Ankleshwar is set up with technical assistance from Reliance Industries. The unit has manufacturing capacity for Ethoxylated products of 15,000 TPA and Glycol Ether and its derivatives of 12,000 TPA. It is in close proximity to Reliance’s Hazira plant from where LPL gets regular supply of its basic feedstock i.e. Etheylene Oxide. Interestingly, the company maintains its own fleet of specially fabricated EO tankers and is the largest merchant consumer of pure ethylene oxide in the country.
Due to the high crude oil prices, the company’s margin has been under pressure for quite some time. It reported lower profits for FY04 though its topline maintained a healthy growth. But due to better product mix and higher price realization, LPL is expected to end FY05 with double-digit growth in its bottomline as well. It may register sales of Rs.140 cr. and NP of Rs.3.80 cr. for the year ending 30th Sept 2005. This works out to an EPS of around Rs.4.75 on its current equity of Rs.8 cr. For FY06, it can report an EPS of more than Rs.6. With a book value of Rs.33 a market cap of just Rs.20 cr. and FY06 earning merely discounted by 4x, this scrip is available quite cheap compared to its peers. Investors are strongly recommended to buy at the current low levels with a price target of Rs.40 i.e. 70% appreciation in 12~15 months.
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