Omkar Speciality can test Rs 180-200: Aashish Tater Moneycontrol (27/12/2012)
Omkar Speciality can test Rs 180-200 in next six to eight months, says Aashish Tater, Head of Research, Fortunewizard.com.
Tater told CNBC-TV18, "Omkar Speciality Chemicals could be a very interesting bet in days to come. If you see the recent announcement of its capacity expansion in the Urdhva Chemicals unit, a 100 percent subsidiary of the company, we feel this stock with almost 2.5 times its current capacity in days to come will report a profit after tax (PAT) of approximately Rs 40 crore on a market cap of Rs 250 crore odd."
He further added, "The products that this particular company offers are into monopolistic state. Not a single company, even on global front, is able to cater to all that products. One interesting aspect is that the demand for this product are rising because Molybdenum, Selenium and Iodine derivatives on the specialised product front for API products have been increasing quite significantly. Even with this capacity ramp up, we feel they will not be able to suffice the demand of the products."
"With every year passing by, the learning curve experience of the stock is going to give them a very good return in terms of the bottom-line. Last year reported profit was around Rs 16-17 crore, capacity of 2,800 tonne will be added to existing 1,820 metric tonne. That means almost 2.5 times the sales is expected for next fiscal. It means the profitability of Rs 40-42 crore on a conservative side."
"We are not assigning a very aggressive target right now. But we feel the stock should go and test Rs 180-200 from next six to eight months perspective, once the financials of Urdhva Chemicals starts. These kind of companies, even on global front for Molybdenum, Selenium, Iodine derivatives, are available sometime at a PE multiple of 12-13 times during good periods. That means from around Rs 260-520 crore of market cap, on conservative side, can easily be taken on."
"Even Lasa, another subsidiary of this particular company, is going to revamp its capacity. That will be an add-on benefit to the company. They have been making a very strategic intent of actually delivering the entire expansion through a small debt proportion and larger proportion through internal accruals. Thus, if we see the downside on this particular stock, it is capped. On upside, we can expect almost 100 percent from next six to eight months, on a conservative side. We feel this is a portfolio bet from medium to long-term perspective."