Andhra Sugars Ltd. - Rs.125.50

Andhra Sugars (ASL) promoted by Dr. Mullapudi Harischandra Prasad is one of the oldest companies of Andhra Pradesh (AP) having been set up in 1947. It is engaged in the production of Sugar, Organic and Inorganic Chemicals, Edible and Non-Edible Vegetable Oils and Non- Conventional Power Generation. Caustic Soda and Sugar are its major businesses contributing more than 80% of its total turnover. It has also been selected by Indian Space Research Organsiation (ISRO) to supply Monomethylhydrazine (MMH), Unsymmetrical dimethylhydrazine (UDMH), Liquid Hydrogen and Hydroxyl Terminated Polybutadiene (HTPB) as rocket fuels. Interestingly, it is amongst the few companies which has never faced a labour strike or unrest over 5 decades of its existence.

ASL is a fully integrated manufacturer of Sugar & Chlor Alkali products with two sugar units at Tanuku with 5,000 TCD and another at Taduvai with 2,500 TCD in West Godavari. It recently acquired West Godavari Sugar Mills (WGSM) at Bhimadole with 1,600 TCD. To cash in on the prospective demand supply gap, the company is increasing its capacity at Tadauvai to 5000 TCD and at Bhimadole to 2500 TCD taking its total crushing capacity to 12,500 TCD, which will go up further to 15,000 TCD in 2006. It operates a 30klpd distillery at Tanuku and has a combined process technology for production of Acetic Acid, Acetic Anhydride and Ethyl Acetate. It has also installed a 250 MW power plant at its Taduvai plant. Excess power is transmitted to APTRANSCO in exchange for power to be supplied to the company’s caustic soda plants. Bagasse, a by-product of sugar, is being used for co-generation of electricity .

ASL has its Chlor-Alkali operations in Kovvur (140 TPD) and Saggonda (200 TPD) both in West Godavari which uses the latest membrane cell technology to manufacture Chlor-Alkali products like Caustic Soda, Chlorine, Caustic Potash, Sulphuric Acid, Hydrochloric Acid, Chlorosulphonic Acid and Potassium Carbonate. Being one of the lowest cost producers and having the most efficient Caustic Soda plants, the company’s products are witnessing a huge demand from the user industries because of which ASL is expanding its capacity at Saggonda to 350 TPD at a cost of Rs 100 cr. and to 400 TPD in 2006. Additionally, the Sulphuric Acid capacity is being raised to 300 TPD to meet the increased demand of Godavari Fertilisers. Hydrogen and Chlorine bye-products at its caustic soda plants are used to produce Hydrochloric Acid and Chlorosulphonic Acid. ASL has its own salt pans in close proximity to its caustic soda plant thereby reducing transportation time and costs.

Being the promoter of Andhra Petrochemicals, ASL owns 25 per cent of its equity, which it plans to divest in future at an attractive price. It is an investor friendly company, which pays handsome dividends regularly. For the quarter ending 31st Dec.2004, it posted impressive numbers as Net Sales increased 19% to Rs115 cr. and NP jumped 56% to Rs11.50 cr. registering a quarterly EPS of Rs4.20 on a paid-up capital of Rs27.11 cr. With the sugar & caustic soda demand expected to remain robust, ASL can post Net Sales of Rs470 cr. and NP of Rs40 cr. leading to an EPS of Rs15~18 in FY05 on a consolidated basis. For FY06, it may post an EPS of Rs22 due to expansion and other market factors. Investors are advised to accumulate this scrip at every decline and keep it for 15 months with a price target of Rs220.