We are pleased to inform you that our Hidden Gem stock of September 2015 - Ultramarine & Pigments Ltd (BSE Code: 506685) which was released on 11th Oct'15 is giving as on date returns of 104% to our Hidden Gems members in 1 year and 5 months. Our team suggested Buy on Ultramarine & Pigments Ltd at price of Rs. 83.35 on 11 Oct'15 with a target price of Rs. 150. Stock has already achieved its target price and we informed our members to continue to hold the stock. We are glad to inform you, Ultramarine & Pigments stock made its 52 week high of Rs. 212 last year and today closed at Rs. 170 giving absolute as on date returns of 104% to our Hidden Gems members in period of 1 year and 5 months.
In Dec'16 quarter, net profit of Ultramarine & Pigments rose 10.01% to Rs 8.57 crore against Rs 7.79 crore during the previous quarter ended Dec 2015. Sales rose 15.45% to Rs 67.78 crore in the quarter ended Dec 2016 as against Rs 58.71 crore during the previous quarter ended Dec 2015.
- Ultramarine Blue
- Ultramarine Violet
- Bismuth Vanadate Yellow
- Mixed Metal Oxides
- Linear Alkyl Benzene Sulphonic Acid
- Alpha Olefin Sulphonate
- Sodium Lauryl Sulphate
- Sodium Lauryl Ether Sulphate
- Dry Mixed Detergents
- IT Enabled Services
- Wind Mill Generation
2. Recent Developments: (as on 11th Oct'15)
i) Ultramarine & Pigments has made a continuous effort to bring in more value added products in pigments division, and has developed products like violet, cobalt blue & yellow. This will help company in improving overall realization of Pigments division. The utilization of the sulphonation plant capacity will also improve due to committed off take of sulphonated products by leading corporates.
iii) In FY 2014-15, exports earnings of the company have increased by 17% (Rs. 55.56 crores as against Rs. 47.29 crores) on account of better performance of both manufacturing & ITES divisions. The Company continues to focus on the export market. Management has been consistently successful in broadening the customer base and at offering custom grade material at faster pace. In order to improve realization, company has focused on offering finer grades of material. The emphasis on in-house R&D augurs well for export market.
iv) Company’s EBITDA and PAT margins are expected to improve considering better margins from IT segment and focus on exports with increase in product offerings.
v) Ultramarine & Pigments is a debt free company with reserves of Rs. 99 crores. Promoter’s shareholding is at 51.99% (as on Sept’15) without pledging any shares. FII shareholding in the company is nil and DII shareholding is negligible at 0.14%.
vii) Gujrat Industrial Development Corporation (GIDC) is in the process of establishing infrastructural facilities at the industrial site at Dahej, Gujarat. The Company has paid water contribution charges for the year, and is waiting for further progress, based on which the Company will initiate the necessary steps for setting up the project to expand its Surfactant Chemical business. viii) Management has rewarded shareholders by paying regular dividend in the past. For FY 14-15, company has declared dividend of Rs. 1.25 per share.
viii) During last 3 years, promoters have increased stake by 4.83% in the company. Considering reasonable valuations and good future prospects, we expect promoters will continue to buy the shares from open market to further increase their stake in the company. Moreover, management has been maintaining a healthy dividend payout of 56.3% and rewarded shareholders by issuing bonus shares in the ratio 3:5 in 2005 which is impressive.
ix) As per our estimates, Ultramarine & Pigments Ltd can deliver PAT of 26 crores for full financial year 2016, annualized EPS of Rs. 8.9 with forward P/E ratio of 9.4X for FY16. Valuation looks attractive for a debt free company with expected expansion in its profit margins.
x) On equity of Rs. 5.84 crore, the estimated annualized EPS for FY 15-16 works out to Rs. 8.9 and the Book Value per share is Rs. 34.07. At current market price of Rs. 83.35, stock price to book value is 2.45.
Considering company’s initiatives to increase its product offering with focus on higher revenues from exports, improvement in operating efficiency from IT division and company’s expansion plans to drive business growth, Saral Gyan team recommends “Buy” on Ultramarine & Pigments Ltd at current market price of Rs. 83.35 for target of Rs. 150 over a period of 12 to 24 months.
- 80% at current market price of 83.35
- 20% at price range of 70-75 (in case of correction in stock price in near term)
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Team - Saral Gyan