Nalanda Securities bullish on Meghmani Organics has recommended buy rating on the stock with a target price of Rs 110 in its research report dated October 12, 2018.
Nalanda Securities' research report on Meghmani Organics
Domestic consumption of caustic soda and chlorine is expected to post 5-8% growth over the medium term. With healthy performance in recent years and expectations of an increase in demand by key consuming sectors, the industry is likely to witness some capacity additions. Demand growth from aluminum and textiles could be robust over the medium term, while segments like soaps and detergents, organic and inorganic chemicals may report moderate and steady growth in caustic soda consumption. Thus, to capitalize on the opportunity MOL has planned to increase the caustic soda capacity by 63% from 1,66,600 MTPA to 2,71,600 MTPA. The project is set to operationalize by June 2019. We expect the plant to generate revenue of approx. INR 300-350 crore at peak utilization levels of 85-90%.
Outlook
At CMP of INR 73 the stock is trading at 3.5x FY20E EBITDA and 8.1x FY20E EPS of INR 9.0. We value using average of DCF & EV/EBITDA and arrive at a target price of INR 110 per share, thereby, representing a potential upside of 50.8% from current valuations.
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