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Strategies & Market Trends : India Coffee House -- Ignore unavailable to you. Want to Upgrade?

To: Mohan Marette who wrote (6315)	9/3/1999 6:33:00 PM
From: Mohan Marette	Read Replies (1) \| Respond to of 12475

CompanyWatch- HIKAL Chemicals -A 'good pick' Financial Express. hikal.chemindia.com Deal with E-Merck makes Hikal Chem a good pick Sanjay Sardana (Financial Express) -------------------------------------------------------------------------------- Even after a four-fold rise from Rs 50 to the current level of Rs 200, Hikal Chemicals is an excellent pick for long-term investors. The stock, despite the stupendous rise to Rs 203, trades at a very attractive price earning multiple of less than 7. Further, on a low equity base of Rs 5.03 crore, the actual floating stock (as a result of a very high promoter stake) is as low as 14 per cent. The Hiremath family holds 36 per cent, while an investment company of the Kalyani family holds 35 per cent and Sumitomo Corporation holds another 14 per cent. Hikal's Thiabendazole (TBZ) plant at Tajola is the only plant in the world with a 100 per cent long-term buy-back agreement with Merck and this makes the stock very attractive. Hikal is the only company in the world which manufactures TBZ and the plant has been set up with the technical support of Merck & Co Inc. The TBZ plant is a 100 per cent export oriented unit (EOU) with the highest standards of safety and environment controls maintained as per the international specifications of Merck. TBZ is an important post-harvest fungicide used for vegetables and fruits. The plant has been set up with an outlay of Rs 130 crore and a sizeable chunk of it comes from Merck in the form of advances against supplies. The implementation of the TBZ plant has helped the company turn around. The company has reported a very attractive annualised earning per share of Rs 28.23. There has been a substantial improvement in profitability margins; the net profit margin in the first-quarter has been as high as 25 per cent. Hikal posted a turnover of Rs 23.35 crore for the first-quarter ended June 1999, registering a growth of 189 per cent over the corresponding quarter last year. The implementation of TBZ plant will help the company achieve a full-year turnover of around Rs 100 crore. Despite a steep rise in interest cost and depreciation, net profit for the first quarter stood at Rs 3.55 crore against a net loss of Rs 0.98 crore in the corresponding quarter last year. However, the only cause of concern is the company's Mahad plant, which has been a drag on the bottomline as its products suffered low realisations due to cheap imports. In 1998-99, sales was lower by 13 per cent from this unit. Products manufactured at the Mahad plant include metachloraniline, metaxuron and paracumidine. Due to the unviability of the main product -- paracumidine -- the company integrated forward to make and export isoproturon to revive this unit. It remains to be seen whether realisations from isoproturon will be higher as there are manymultinational majors making this product with a cost advantage.