1,000% return in 2 years: If you judge a stock by its business, this should not escape notice
This first-generation smallcap petrochemicals firm has been busy doubling its bottom line.
Shares of the company have been doing wonders on Dalal Street, with a nearly 1,000 per cent surge in two years. The scrip traded at Rs 209 on April 19, 2018, rising from just Rs 18.80 on April 11, 2016.
Analysts are optimistic that the stock will go the distance.
BEPL is engaged in the business of manufacturing of ABS (acrylonitrile butadiene styrene) –a raw material used extensively across industries like auto, home appliances, telecommunications, luggage and other sectors.
For the year ended March 31, 2018, the company reported a net profit of Rs 99.64 crore, up 179.64 per cent from Rs 35.63 crore reported for the year-ago period. Its bottom line figure for FY16, FY15 and FY14 stood at Rs 16.69 crore, Rs 5.40 crore and Rs 1.48 crore, respectively.
The company has a strong clientele, who include HMSI, Maruti, Whirlpool, Samsung, LG, Toyota, Mahindra, Bajaj, Godrej ,Hero Motocorp, TVS Motor, among others.
Bhansali Engineering is debt-free. On March 31, it informed the bourses that it had repaid the entire amount of the sanctioned working capital credit facilities amounting to Rs 216.5 crore to Allahabad Bank, Mumbai.
The bank has issued it a no dues letter and released some 5 crore equity shares pledged with it along with other collateral securities, including land and building, plant & machinery, all other fixed assets related to its Abu Road Plant and Satnoor plant.
Promoters’ stake has increased marginally to 55 per cent at the end of March quarter, FY18, from 54.69 per cent and 54.25 per cent at the end of December and September quarters, respectively. BM Bhansali, Jayesh B Bhansali, Meenakshi Bhansali and others are among the major promoters in the company.
Shares of BEPL currently trade at 29 times of FY19E EPS of Rs 7.26. On the back of an increase in global ABS prices, it stands to benefit from its capacity expansion plans.
The company’s efforts to deleverage its balance sheet and fund its expansion plans through internal accruals show strength in its fundamentals, brokerage Hem Securities said in a note.
Bhansali Engineering expects to save its logistics cost and increasing quality competitiveness against international giants in ABS manufacturing field.
The brokerage has a ‘Buy’ rating on the stock with a long-term price target of Rs 255.
ABS is an opaque thermoplastic and amorphous polymer. It is used for manufacturing drain-waste-vent (DWV) pipe systems, musical instruments (recorders, plastic clarinets, and piano movements), golf club heads (because of its good shock absorbance), automotive bumper bars, medical devices for blood access, enclosures for electrical and electronic assemblies, protective headgear, whitewater canoes, buffer edging for furniture and joinery panels, luggage and protective carrying cases, small kitchen appliances, and toys.
Brokerage Prabhudas Lilladher says it expects BEPL to grow revenues at 44.4 per cent CAGR and Ebitda by 71.2 per cent over FY17-20E and profits by 79.6 per cent to Rs 1,890 crore, Rs 310 crore and Rs 200 crore, respectively, on richer product mix as well as better fixed cost absorption.
The company’s net sales increased 50 per cent year-on-year to Rs 1,058.83 crore in FY18 from Rs 704.09 crore a year ago.
The company is in the midst of expanding capacities aggressively and has ramp-ups lined up for next 12 months.
“As we roll over our earnings to FY20E, it would be futile not to make note of the structural tailwinds BEPL is privy to, given the demand dynamics of the industry in which it is now as the leading player. Keeping this in mind, we would consider FY20E profits of Rs 200 in deriving valuations and re-iterate an ‘accumulate’ rating at these levels with a medium-term price target of Rs 266,” Prabhudas said in a note.
The company was incorporated on April 9, 1984 as Bhansali Steel and was renamed as Bhansali Engineering Polymers on January 23, 1986.