Transpek Industries - Rs.93.00

Transpek Industries Ltd. (TIL) was actually set up in 1965 for manufacturing Transparent Acrylic Sheets and hence was named ‘Transpek’. Since then, the company has grown into a leading manufacturer and exporter of a range of chemicals servicing the requirements of textiles, pharmaceuticals, agrochemicals, polymers etc. In fact, today TIL is Asia’s largest manufacturer of Thionyl Chloride and Acid Chloride. Thionyl Chloride is an intermediate for crop protection chemicals in the agrochemicals industry. Managed by the Shroff family of Excel Industries fame, TIL used to be the largest and only manufacturer of sodium hydro sulfite, safolite, safoline, zinc oxide and zinc dust. But these businesses have been transferred to Transpek Silox Industry Ltd., a joint venture company.

With it’s expertise in sulphur and chlorine chemistry and ability to undertake projects involving sulphonation, acid chloride reaction, friedel-craft, esterification and high pressure reaction, TIL also does Custom Synthesis and Toll Manufacturing. Notably, its R&D activity is so strong that the manufacturing technologies for all its existing products are developed in-house. In fact, last fiscal it adopted improved technology for the manufacture of Thionyl Chloride and with de-bottlenecking enhanced its installed capacity from 16500 TPA to 19500 TPA. It is further planning to expand the capacity to 24000 TPA. Moreover, it has also commissioned the continuous Acid Chloride plant, which will lead to consistency in production and quality, better efficiency and lower man-power requirement. It is putting special thrust on exports and is in the process of tying up business with several reputed overseas companies. Also in order to hedge itself from the seasonality in business, the company is focusing on other market segments such as intermediates for pharmaceuticals, dyes and polymers.

Fundamentally, the company is doing extremely well. For the six months ending 30th Sept.’06, while sales increased by nearly 40% to Rs.47.50 cr. net profit zoomed 120% to Rs.4.30 cr. importantly, its OPM improved substantially to 21.50% against 16% last year. Assuming the same growth record, it is estimated to end FY07 with sales of Rs.100 cr. and net profit Rs.9 cr. This will lead to an EPS of Rs.18 on its current equity of Rs.5.07 and it may declare 35% dividend for FY07. Having a book value of Rs.70 and with a dividend yield of nearly 4%, this scrip is trading fairly cheap at P/E multiple of 5. Investors are recommended to buy it at declines with a price target of Rs.150 i.e. 50% return in 12-15 months.