Buy Asahi Songwon Colors - Latin Manharlal Securities Pvt. Ltd

COMPANY PROFILE

Asahi Songwon Colors Ltd. (ASCL), incorporated in 1990 as a private limited company called Lucky Laminates Pvt. Ltd in Gujarat was promoted by the Jaykrishna family of Ahmedabad. In the year 1995-96, the company entered into a J.V agreement with Songwon Color Company Limited (SCCL), South Korea with financial investment and supply of technology for manufacture of Green Crude.

ASCL is primarily engaged in the manufacturing of pigments such as Copper Phthalocyanine Crude (CPC) Green, CPC Blue and Beta Blue which are predominantly exported. Pigments are industrial chemicals used as colouring agents and have varied applications in printing inks, plastics, paints, textiles and papers.

INVESTMENT POSITIVES

- User Industries outlook remains positive - augurs well for ASCL
- Capacity expansion for 'Beta blue pigment' to boost profitability
- High quality standard - acts as a key differentiator and a strong entry barrier
- Healthy relationship with global customers – exports accounts ~80% of revenue
- Likely improvement in Plant efficiency going forward – Management guided
- Strong Financials
- Improving Return ratios

OUTLOOK AND VALUATION

At the CMP of Rs.81.40, the stock is trading at 3.4x its FY13E EPS of Rs.24.20. We recommend BUY on the stock with a 12¬18 months target price of Rs.110.70, providing an upside of 36% from the current levels.

Source : Equity Bulls

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