Gu­jarat Am­buja Ex­ports Ltd

(BSE Code: 524226) (CMP: Rs.235.55) (FV: Rs.2) By Pratit Nayan Pa­tel

Money Times - - Bull’s Eye -

Com­pany Back­ground: In­cor­po­rated in 1991, Ahmed­abad-based Gu­jarat Am­buja Ex­ports Ltd (GAEL) is a lead­ing man­u­fac­turer of starch de­riv­a­tives, soya de­riv­a­tives and cot­ton yarn. Its multi-di­men­sional and multi-prod­uct units are FSSC 22000, ISO 9001:2008, 22000:2005, GMP, Ha­lal & Kosher cer­ti­fied. It has 6 sol­vent ex­trac­tion plants with a com­bined crush­ing ca­pac­ity of 4,500 MTS a day. It has ed­i­ble oil re­finer­ies and plants, a wheat milling di­vi­sion, a ring spin­ning cot­ton yarn unit and soya pro­cess­ing plants, which have the sec­ond high­est crush­ing ca­pac­ity in In­dia. It is the largest corn pro­ces­sor in In­dia with 4 state-of-the-art corn pro­cess­ing plants that have a com­bined crush­ing ca­pac­ity of 3,000 MTS a day. Its ‘Tree’ brand is known in­ter­na­tion­ally for the best qual­ity yarn. It is also en­gaged in the pro­duc­tion of green en­ergy from wind tur­bines and so­lar. It gen­er­ates more than 60% of power us­ing non-con­ven­tional sources of en­ergy.

Fi­nan­cials: With an eq­uity cap­i­tal of Rs.22.93 crore and re­serves of Rs.999.42 crore, GAEL’s share book value works out to Rs.89. The pro­mot­ers hold 63.76% of the eq­uity cap­i­tal, Mu­tual Funds hold 0.71% and FPIs hold 1.43%, which leaves 34.09% stake with the in­vest­ing pub­lic.

Per­for­mance Re­view: GAEL had per­formed well last year de­spite the im­pact of GST in H1FY18.

There was a favourable change in rev­enue mix as ex­ports grew 129% in FY18. For FY18, GAEL re­ported higher sales of Rs.3364.43 crore with

13% higher PAT of Rs.179.88 crore and an EPS of Rs.15.7. Dur­ing Q2FY19, it re­ported 58% higher

PAT of Rs.33.14 crore on higher sales of Rs.776.31 crore and an EPS of Rs.2.9. For H1FY19, it re­ported 128% higher PAT of Rs.86.19 crore on 8% higher sales of Rs.1580.46 crore and an EPS of Rs.7.5.

Its prof­itabil­ity has grown at 29% CAGR over the last 3 years. It paid 45% div­i­dend for FY18 v/s 40% in FY17.

Maize Pro­cess­ing: This seg­ment has strength­ened its geo­graph­i­cal pres­ence in West, North and South In­dia post com­ple­tion of the Chal­is­gaon project (Phase I) and has the po­ten­tial to be­come the high­est rev­enue con­trib­u­tor among all seg­ments. The Chal­is­gaon unit helped GAEL tar­get the ex­port mar­ket for starch ag­gres­sively, which in turn led to other units fo­cus­ing on de­riv­a­tive pro­duc­tion. We ex­pect GAEL’s re­al­iza­tions and mar­gins to im­prove in H2FY19 post com­mis­sion­ing of the ad­di­tional ca­pac­i­ties in this seg­ment.

Agro Pro­cess­ing: The re­fin­ing ac­tiv­ity has re­duced GAEL’s dependency on im­ported crude ed­i­ble oil. Tra­di­tion­ally, its oil seed crush­ing seg­ment was driven by ex­ports. De-oiled cake ex­ports grew sig­nif­i­cantly in H2FY18. But In­dian man­u­fac­tur­ers have been un­happy with the unattrac­tive prices of­fered for ex­ports of late due to which ex­ports of deoiled cake have re­duced over the past few years. How­ever, in­creas­ing do­mes­tic con­sump­tion of de-oiled cake is likely to cover up for the loss in the ex­ports mar­ket. The man­age­ment ex­pects the do­mes­tic mar­ket to con­sume ma­jor­ity of the de-oiled cake pro­duc­tion. There­fore, we ex­pect ca­pac­ity uti­liza­tion of oil seed crush­ing to grow go­ing for­ward. This in turn will boost the ca­pac­ity uti­liza­tion of the re­fin­ing seg­ment with min­i­mum de­pen­dence on im­ported crude oil.

Cot­ton Yarn: This seg­ment recorded higher pro­duc­tiv­ity last year. Im­proved plan­ning of count mix in pro­duc­tion led to higher pro­duc­tiv­ity and sus­tained growth in the do­mes­tic as well as in­ter­na­tional mar­kets.

Power and Re­new­able En­ergy: GAEL has cap­tive power plants at all its man­u­fac­tur­ing units. Apart from the con­ven­tional en­ergy in­fra­struc­ture, it uses non-con­ven­tional sources of en­ergy at all its maize pro­cess­ing seg­ments. The

state-of-the-art in­fra­struc­ture at these units en­sures the use of in­dus­trial waste for power gen­er­a­tion for cap­tive use. With grid con­nected fa­cil­i­ties in Gu­jarat and Mad­hya Pradesh, GAEL has also helped pro­mote gov­ern­ment schemes of wind and so­lar en­ergy.

Con­clu­sion: The stock is avail­able at around 24% dis­count to its 52-week high of Rs.309.85 recorded in April 2018. The stock cur­rently trades at a P/E of 12x and looks quite at­trac­tive based on its fi­nan­cial pa­ram­e­ters. In­vestors can ac­cu­mu­late the stock on dips with a stop loss of Rs.200 for a price tar­get of Rs.350-375 in the next 18-24 months. The stock’s 52-week high/low is Rs.309.85/158 and its mar­ket cap stands at Rs.2700 crore.

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