Buy Tamilnadu Petroproducts Ltd For Target Rs.135 - Sushil Finance
Follow us Now on Telegram ! Get daily 10 - 12 important updates on Business, Finance and Investment. Join our Telegram Channel
https://t.me/InvestmentGuruIndiacom
Download Telegram App before Joining the Channel
Increased demand for detergents & sanitization products and Capex to drive growth
The Covid-19 pandemic brought with it a need for frequent cleaning and sanitization. This increased the demand for detergents and disinfectants significantly. One of the key raw materials in the production of such detergents and disinfectants is Linear Alkyl Benzene (LAB). TNPETRO is the 3 rd largest manufacturer of LAB in India supplying its product ‘Superlab’ to large FMCG players. The company’s revenues have grown aggressively over the last 1 year and demand for LAB remains strong. Due to this, the company has charted a capital expansion plan of Rs. 435 cr towards upgradation of the existing facilities and increase in capacities of LAB and Caustic Soda.
Strong balance sheet aided by revenue growth and margin expansion
TNPETRO has an asset base of Rs. 275 cr which will be further enhanced by the capital expenditure outlay. The company has no long term debt and has consistent healthy operating cash flows, resulting in a strong cash balance. The cash conversion cycle for TNPETRO is at under 60 days for FY21 and under 30 days during the prepandemic period. The company has also maintained a healthy dividend payout ratio of over 15%. Over 9MFY22, the company has delivered revenues of Rs. 1,371 cr with an EBITDA margin of 15.2%, up from 8.2% in FY18.
Outlook and Valuation
We have forecasted a revenue growth of 21.4% CAGR over FY21-24E where we expect revenue for FY24E at Rs. 2,049 cr, EBITDA at Rs. 276 cr at an EBITDA margin of 13.5% and Net Income of Rs. 187 cr. We estimate FY24E EPS at Rs. 20.82 and assign a PE multiple of 6.5x to arrive at a target price of Rs. 135, which is an upside of ~30% from today’s price of Rs. 104. We initiate coverage on Tamilnadu Petroproducts Ltd. with a BUY rating, over an investment horizon of 18-24 months.
To Read Complete Report & Disclaimer Click Here
Please refer disclaimer at https://www.sushilfinance.com/Disclamier/disclaimer
Member : BSE/ NSE/ MSEI. SEBI Registration No.-INZ000165135
Above views are of the author and not of the website kindly read disclaimer
