Sarla Polyester -- Rs.133.00

Incorporated in 1995, Sarla Polyester Ltd (SPL) is a 100% Export Oriented Unit (EOU) engaged in the manufacturing & texturising of synthetic yarns. It manufactures polyester, nylon texturised, twisted and dyed yarn. It also makes spandex and lycra/spandex covered yarns. In fact, it supplies lycra-covered yarns to various parties including Delta Inc. of USA, which is one of the largest producers of socks in the world. SPL is able to develop and satisfy all kind of requirements of manufacturers of sewing thread, hosiery socks, knitwear, woven labels, window lace, raschel and levers, lace, hosiery yarns, medical textiles, narrow fabrics, woven fabrics, industrial yarns and hand knitted fabrics. Currently, SPL exports to more than 20 countries across the globe including USA, UK, Canada, Germany, Australia, Malaysia, Sweden, Italy etc.

SPL has its units at Silvassa and Vapi, both of which are vertically integrated plants and have the flexibility to process orders ranging from a few thousand to several hundred thousand kgs. It also has its own dyeing house with muff / hank dyeing facility to dye nylon yarn with high level of stretch and elasticity. In FY04, it also set up a new unit with a capacity of 2,734 tonnes a year at Silvassa at a cost of Rs.20cr. process various types of polyester and nylon among others. With this, its total capacity has gone up to 9434 TPA. To increase its product range, SPL has already put in place an ultra modern spinning plant to produce high-tenacity nylon threads with a capacity of 1,200 TPA. These high tenacity yarns in the mid range denier have a wide range of applications and are used for car airbags, parachutes and other defence related fabrics, fishing nets, industrial fabrics and filters/hoses apart from being used for sewing of leather shoes, car upholstery etc. Interestingly, it is also expanding its lycra/spandex/rubber covering capacity though it has India's largest covering capacity. It is also investing around Rs.2 cr. in Savitex SA de CV in Honduras, Joint Venture established for the manufacture of Synthetic dyed yarns on 50% partnership share basis.

Of late, the profitability of the company has increased dramatically due to improvements in product mix and addition of newer and higher value added items. For future growth, SPL is focusing on value-added products and specialized synthetic yarns, which require highly skilled manpower, especially for mixing dyes. SPL is almost a debt-free company with a very strong financial muscle. For FY06, it is estimated to clock a turnover of Rs.85 cr. and NP of Rs.12 cr. which may rise to Rs.105 cr. with NP of Rs.14 cr. for FY07. This translates into EPS of Rs.17 and Rs.20 respectively. Investors are advised to buy at declines with a price target of Rs.200 (50% appreciation) in 12 - 15 months.