Kilburn Chemicals - Rs.49.00

Incorporated in 1990, Kilburn Chemicals Ltd (KCL) is a professionally-managed company growing under the guidance of Mr. Deepak Khaitan of the Williamson Magor Group. It is engaged in the production of Titanium Dioxide (TiO2) and ferrous sulphate salt. TiO2 finds use in a variety of industrial products such as paints, footwear, rubber products, plastics, paper, cosmetics etc. whereas ferrous sulphate is a greenish crystalline chemical used in a wide range of applications - as a plant nutrient, in effluent treatment and as a starting material for iron oxide pigments. Importantly, there are only 2 manufacturers of TiO2 in India, which means large portion of the TiO2 demand is fullfilled by imports. KCL also produces Ferro Gypsum, a by-product, which is ideally suitable for groundnut/paddy cultivation and for the sugarcane crop.

KCL’s manufacturing plant is located at Thoothukkudi, Tamil Nadu with an installed capacity of 8250 MTA of TiO2 and 17580 MTA of ferrous sulphate salt. Conforming to ISO & BIS standards, anatase grade TiO2 is manufactured via the sulphate route. This is the only integrated TiO2 plant in India fully-equipped with a self-integrated Pollution Abatement Scheme. An acid re-concentration plant is also under implementation to drastically reduce acidic effluent generation. Being closed to the availability of main raw material i.e. Ilmenite, KCL is able to produce TiO2 at a reasonable cost. As it faces major competition from imports, the biggest breakthrough was the imposition of the final anti-dumping duty on TiO2 imports from China by the department of Commerce in March 2004. Due to increased demand for its products by the user industries, KCL plans to increase production and change the product mix with more value-added products. It’s also putting greater thrust on exports to advance the market for better margins.

Besides, KCL is exploring the possibility of setting up new business in the area of Information Technology. It is also setting up windmills for generation of electricity at a lower cost. For the first six months ended 30th September’05, its total revenue increased by 13% to Rs.29 cr. but its NP doubled to Rs.3.20 cr. For the full year FY06, it may clock a turnover of Rs.65 cr. and NP of Rs.6.50 cr. This works out to an EPS of Rs.9 on its current equity of Rs.7.40 cr. KCL may declare 20% dividend for FY06 which amounts to a dividend yield of 4% at the current market price (CMP). Investors are advised to buy and hold this scrip for at least one year with a price target of Rs.75 i.e. 50% appreciation. Long-term investors can expect it to double in 18~24 months.