>GANESH POLYTEX LIMITED (UNICON INVESTMENTS)

Recycling waste into wealth
We spoke to the CFO Mr Gopal Agarwal of Ganesh Polytex Ltd (GPL) for an outlook on the Business and Strategy of the company. Following are the key takeaways from the meet.

Investment Highlights
Commissioning of new RPSF facility
GPL is set to become the largest player in RPSF in the country with the commissioning of its 18,000 TPA plant by the end of this month at its Rudrapur facility at an estimated cost of INR 250 mn. This will take the total RPSF capacity of GPL to 57,600 TPA beyond the current market leader Reliance Industries’ capacity of 42,000 TPA. The commissioning of this facility is expected to improve the operating margins by around 250 basis points making.

Expansion plan to drive growth
The company’s ambitious growth targets include enhancing the recycling capacity to over 100,000 TPA in stages over the next 3-4 years, building up of yarn spinning capacity to integrate its operations forward, foraying into manufacturing of downstream products and entering into horizontal integration through producing more value added products like Partially Oriented Yarn (POY), packaging sheets, etc. from pet bottle waste.

These growth plans would help the topline and bottomline to grow at a healthy CAGR of 35-40% over the next few years.

Valuation & Outlook
At the CMP of INR 42, the stock trades at 4.8x its FY11e EPS of INR 8.8 (on weighted average capital). The company’s FY10e sales are 5x the current market capitalisation and the price to cash EPS is 3.1x. The stock looks attractive considering the expansion in capacity and the growth of the user industry. We applied a multiple of 4x on FY12e EPS to arrive at our target price of INR 64. We feel investors can buy the stock at current levels for a good upside within a year.

To read the full report: GANESH POLYTEX LIMITED