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