>SABERO ORGANICS (ANAND RATHI)

A MULTI-BAGGER STOCK

Investment Argument
• Company is an integrated agrochemical player and largest producer of 2 of its key products [ Mencozed & Glyphosate ], in India and second largest in world.

• Capacities of its key products doubled recently [in Jan’09], full benefit of which will accrue from current year onwards. Withmost of the production tied up for sales to large MNCs, accounting for almost 70% of total sales, hence domestic monsoon conditions will have limited impact on sales.

• With over 200 product registrations of bulk & 45 for formulations across 35 countries, export potential is huge.

• Company is targeting to grow from current sales of Rs 366 Crs to around Rs 1000 Crs in next 3 years, with commensurate rise in profits.

• The valuations of company deserve a re-rating because – post Chinese Olympics, dynamics of industry changed for better. [This is following Chinese stricter norms for environmental protection, leading to closure of capacities and for remaining plants, there was a rise in cost due to installation of waste/water treatment facilities]. This led to a general rise in product prices since last year.

• This led to a general improvement in margins for this industry, which is yet not captured in by valuations of this sector, [which were very poor traditionally due to low margins], now needs to
be re-rated due to better margin trend.

• The Present Mkt cap [Rs 80 Crs] of company is less then 25% of the sales for ’09, and replacement cost is just 30%. Thus offering huge scope for appreciation.

• At present stock discounts 2010 earnings by just 2X and going by stated target of attaining Rs 1000 Crs turnover in 2-3 years, it deserves at least 4-5X discounting, leading to one year target of
Rs 48-60 and 2 years target of Rs over Rs 75-90.

To see full report: SABERO ORGANICS