Alufluoride Ltd - Rs.17.55

Promoted by V S Prasad and K Ramachandra Reddy, Alufluoride Ltd (AL) was incorporated as a private limited company in Nov.'84 and subsequently converted into a public limited in Oct.'92. In 1995, it set up a plant to manufacture aluminium fluoride (ALF3) at Vishakapatnam with technical know-how from Navin Fluorine Industries. Since then, AL has emerged as reputed manufacturer and exporter of ALF3 with a current production capacity of 6000 TPA. ALF3 is used as flux in reducing the melting point of Alumina during the electrolytic process of producing Aluminium. This is of critical importance for lowering consumption of electricity during the smelting process. Consequently, Aluminium Smelters are the biggest users of ALF3.

AL’s plant is located 10 km from the Vishakapatnam seaport and is the only plant in Andhra Pradesh producing high purity AIF3 with the new technology developed by Alusuisse, Switzerland. Importantly, the company has an agreement with the adjoining plant of Cormandel Fertlizer to supply 4,000 TPA of Hydrofluosilicic Acid exclusively to them. Accordingly the company’s plant converts fluorine pollutants discharged from Coromandel’s fertilizer plant into hydrofluosilicic acid and then to ALF3. Hence, this technology is a pollution abatement, import substitute, conserves natural resources like fluorspar & sulphur, cost effective, converts waste into wealth and earns valuable foreign exchange. Moreover, during the production process two by-products viz. Silica and Calcium Fluoride are released, which are also used by the chemical industry. Over the last few years, the company could not perform well due to short supply of acid from Coramandel Fertlizers. But in FY06, the company succeeded in sourcing an alternate supplier for Hydrofluosilicic. Acid for conversion on an ad-hoc basis and is now working at higher capacity utilization. With higher operational efficiency, its production capacity has now been increased to 6,000 TPA against 5,000 TPA earlier.

Since aluminium smelters in India are abroad are increasing their production capacities and new aluminium smelters are coming up with higher capacities, this will result in increased demand for AIF3. Besides, the company is also planning to increase its focus on exports, due to increased orders at better prices from the Middle East and other countries. On account of better cash flows, AL has repaid all its dues and has become a debt-free company. For H1FY07, while sales grew by 35% to Rs.10.60 cr., the NP zoomed by 220% to Rs.1.40 cr. Its OPM improved substantially to 15% compared to 10% last year due to higher price realization and better operating efficiency. It may end FY07 with a turnover of Rs.22 cr. and NP of Rs.2 cr. which means an EPS of Rs.3 on its equity of Rs.7 cr. Investors are advised to buy it only at sharp declines around Rs.14-15 as the scrip can once again test its 52W high of Rs.24 in 9~12 months