GSFC - Spreads decline; downgrade to Accumulate - Emkay

ACCUMULATE
CMP: Rs443
Target Price: Rs530

- Caprolactam prices declined by 26% from their all time high of $3580/mt in Sep-2011 to $2650/mt in the last week of November.

- Driven by decline in caprolactam prices, caprolactam-benzene spreads also declined to $1700/mt at the end of Nov-11 compared to $2465/mt during September.

- Sharp fall in spreads is likely to lead to deceleration in earnings for GSFC and growth is likely to remain suppressed in near future.

- We maintain FY12/FY13 est at Rs 84.6 / 78.4 since we have not built in aggressive spreads. However, downgrade the stock to Accumulate from BUY on recent run-up in stock.

Source : Equity Bulls

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