Sukhjit Starch & Chemicals Ltd - 146.00 Rs

Established in 1944, Sukhjit Starch and Chemicals Ltd (SSCL) is a well known player in maize starch and its derivatives. Hence its engaged in manufacturing edible maize starch used in the preparation of ice-cream, custard powder, confectionery etc, maize starch used in the textile and paper industries, dextrine used in foundries as a binder, liquid glucose used in the manufacture of jams, jellies, chewing gums, etc and dextrose monohydrate (glucose) used in pharmaceuticals. Besides it also produces sorbitol, maize oil, maize gluten, maize husk, liquid glucose, high maltose syrup, oxidized/pregelatinized starch etc. It has an impressive clientele including corporates like Britannia, Dabur, Colgate, HLL, Heinz, Ballarpur, Berger paints, JCT, Mahavir Spinning. Wockhard etc.

SSCL has three manufacturing plants spread across Phagwara-Punjab, Nizamabad-Andhra Pradesh, and Malda-West Bengal. Incidentally, SSCL is the only multi-locational group in India as of now with a combined installed capacity of 1,50,000 tons corn grind per annum. With a view to take advantage of emerging opportunities in starch industry, company has embarked on new expansion project in Himachal Pradesh entailing a capital cost of Rs.30 crore. Trial runs have been carried out and commercial production is expected to start in June 2007. This new unit will enhance the capacity by nearly 25% and is likely to be dedicated for high margin starch and derivative products especially for pharmaceutical industry taking shape in Baddi, Himachal Pradesh. In future company is also planning to start producing maltitol, spray starch, cationic starches, acetylated starches etc. Although negligible currently, but going forward company may start exploring the international market for export.

However, SSCL’s performance largely depends on availability and cost of raw material i.e. maize which is subject to natural vagaries. Of late the maize prices are ruling very high, still the industry is in position to pass on increased raw material costs due to strong demand. Moreover the per capita production of starch is still much lower as compared to world average and there is reasonably a good scope for increased demand. It ended FY07 on quite a buoyant note, with sales grew by 32% to 162 cr but NP tripled to 21 cr registering an EPS of 28 Rs on equity of 7.38 cr. Assuming the company to register 18% operating margin for FY08, it can report sales of 200 cr and PAT of 23.75 cr i.e. EPS of 32 Rs on current equity. Being a commodity company, at a reasonable discounting by 6x times the scrip has the potential to touch 200 levels in 9~12 months.