Panama Petrochem - Rs.56.00

Panama Petrochem Ltd (PPL) was incorporated in the year 1982 as a private limited company by the Rayani family, which has over three decades trading experience in petrochemicals. PPL manufactures and exports a a wide variety of petroleum based speciality products. They include ink & resin oil, mineral oil, transformer oil, petroleum jellies, liquid paraffin, white oil, turbine oil, loom oil, wax, grease etc. The company sells its product under the name of 'Panama' and exports its products to USA, UK ,UAE, SaudiArabia, Australlia, SriLanka, Egypt, Tanzania, Syria, Italy, Turkey, Nigeria & some other African Countries. It is also the sole distributor of lubricants for foodstuff, paper, textile, and automotive industries manufactured by Lubcon of Germany.

PPL’s plants are located at Ankleshwar, Mumbai and Daman. The Daman unit manufactures Antistatic Coning Oils, Petroleum jelly (Cable Filled Compounds) & Specialty Lubricants and Oils with a capacity of 36,000 MT and went operational in Dec 2003. Its total installed capacity stands at 51,000 MTA. The company has received ISO 9001:2000 certification for its manufacturing processes. It manufactures the products as per International Environmental & Safety Norms and its Petroleum and White Mineral Oils are as per BP/USP FDA norms for specific users. It has developed a good export market by participating in international trade shows and is expected to bag some orders from various malls in USA for supply of its indigenously developed non-smoky and environment friendly lamp oil, which is in demand in USA.
Apart from the petrochemical industry, PPL also caters to the Printing Ink, Agarbatti, Perfumery, Rubber, Pharmaceutical, Cosmetics, Texturizing, Engineering, Machinery Manufacturing and Chemical sectors. Its products are also used by various Power Generation utilities and Atomic Research Centres. Such a large & diversified end user base and exports help it de-risk its overall business model. But rising crude oil prices is still a big concern for it as it is a key raw material.

PPL is planning to issue 5, 00,000 shares on a preferential basis to promoters at Rs58 per share, which is at a marginal premium to the current market price (CMP). As on 31st Dec. 2004, the promoters were holding 32% stake, which will increase to 40% post allotment. It’s a investor friendly company with a dividend payout ratio of more than 30%. For FY05, it could declare 25% dividend which works out to around 5% dividend yield. For the nine months ended 31 Dec. 2004, its topline grew by 35% to Rs52 cr. but the bottomline tripled to Rs2.45 cr. For FY05, it may post sales of Rs75 cr. with and NP of Rs3.40 cr. leading to an EPS of Rs9 on its current equity of Rs3.76 cr. For FY06, it could report an EPS of Rs11~12 depending on crude oil prices. Investors should buy this share only at sharp declines or a major correction with a price target of Rs75 in next 12~15 months.