Accumulate GSFC - Emkay

GSFC
Reco: Accumulate
CMP: Rs 373
Target Price: Rs 530
Analyst Meet Update

We attended GSFC’s analyst meet held on Dec 16th, 2011. The discussion focused on how GSFC has evolved as a company and the way forward. Here are the key takeaways -

- GSFC plans to finance entire capex through internal accruals. Current expansion projects include TIFERT, methanol, nylon-6 etc with total investment of Rs 14bn

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

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

- Despite attractive valuations, 52% of cmp in cash and equivalents and FY12 EV/EBITDA of 1.7x, P/E of 4.4x, we maintain ACCUMULATE rating due to declining spreads.

Source : Equity Bulls

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