Thursday, November 4, 2010

Gujarat Alkalies and Chemicals Limited - Extremely Undervalued

GACL - is one of the navratna companies of Gujarat Governement.  It is currenlty trading at 3.7x  Cash flow. The M.Cap is 900 Cr. , Debt is 300 Cr. and has Investments in listed companies which are worth 140 Cr. (at cost).  If we calculate the worth of the  investments in the balance sheet at market value, they are worth 600Cr, hence the company valuation is even much more cheaper than what it appears. The EV/EBITDA should be just 2 if we consider investments as good as cash.

The valuation are lagging despite a consistent profitability and dividend paying track record and an aggressive expansion plan under implementation

1 comment:

  1. GACL really is a great idea. The expansion projects that they are implementing will allow an appreciable EPS growth in the near term. I expect the share price to atleast trible from current levels. The company is planning a number of wind farms which will give them tax benefits. Besides wind power, they are also executing a power plant in collaboration with GIPCL. Post completion of these power projects, GACL will become self reliant as far as power requirement is concerned. It will also substantially bring down their power cost whcih is a decent percentage of their total cost structure.
    As far as expansion projects are concerned, they have recently implemented a 50 TPD caustic soda expansion project. They are expanding their hydrogen peroxide facility at dahej by 100% which should be ready by 2011. They are also putting up a calcium chloride project as part of value addition of the hydrochloric acid plant. The project has recently been commissioned. A stable bleaching powder project has also been recently implemented. The most important project is DOW GACL JV being 2lkhs TPA capacity Chloromethane plant at Dahej ( Rs 750 cR.)