Jhunjhunwala Vanaspati - Rs.40.50

Incorporated in 1989, Jhunjhunwala Vanaspati Ltd (JVL) is primarily engaged in the production of refined oil & vanaspati ghee. It markets and sells its products under the brand name ‘Jhoola’ which is a leading brand in UP and eastern India with about 40% market share. Its vanaspati ghee and refined oil is basically consumed by the medium and lower income group and in the rural areas. The company uses modern technology for refining oil as the traditional method of chemical refining leads to high process losses in comparison to the physical refinery

JVL’s has a state-of-the-art integrated plant with an installed capacity of 350 TPD. In fact, it is the single largest unit manufacturing vanaspati ghee in India. The company has continuously gone in for technological upgradation over the last few years and has obtained ISO 9001- 2000 certification for its quality system. JVL has also tied up with the UK-based Oriental Commodities to produce herbal Ayurvedic capsules of various popular vegetables, fruits and herbs by preserving them in their purest form to maintain the original colour, flavour, taste and potency of product. It has also ventured into the manufacture of HDPE containers and tin containers. Apart from all these developments JVL is expected to perform better thanks to the incentives to the sector, which includes abolition of excise duty combined with a possible offer to import vegetable oils at concessional rate for production of Vanaspati.

Fundamentally as well as financially, the company is quite strong. It’s a debt free and cash rich company having huge liquid investments, equivalent to almost Rs.127 per share. On its small equity of Rs.6.83 cr., it has reserves of around Rs.28 cr., which leads to a book value of Rs.61 as on 31st March 2005. For FY05, it earned NP of Rs.5.80 cr. posting an EPS of Rs.8.50 on total sales of Rs.486 cr. Again, the company has posted encouraging result for the June’05 qtr with Sales of Rs.146 cr. and NP of Rs.1.75 cr. Considering all these factors, JVL is expected to end FY06 with turnover of Rs.600 cr. and NP of Rs.6.50 cr. which means an EPS of Rs.9.50. Investors are strongly recommended to buy this scrip with a price target of Rs.60 (50% appreciation) in the next 9~12 months.