Ganesh Benzoplast Ltd (GBL - established in the year 1988) is engaged in Logistic-Infrastructure and Chemicals business. Company’s Liquid Storage Tankers (LST) business is located in JNPT (Mumbai), Goa and Cochin Port. Company is also a manufacturer of food preservatives, lubricant Additives, API drugs, Sodium Benzoate, Benzoic Acid and Benzaldehyde etc. Company’s products are used in food & Beverage, automobile, paints, Lubricants and pharmaceutical industries. Its Chemical manufacturing facility is located at Tarapur Thane.
- Expansion plans at existing locations could help to boost revenues and margins from LST business going forward;
- Demerger proposal of loss making chemicals business could help unlock value of LST business and lead to overall rise in company’s valuations;
- Proposed greenfield LPG terminal at Goa could provide medium term visibility to revenues and margins;
- Debt reduction and higher operating profits could lead to attractive EV/EBITDA number.
- Government’s plans for development of Coastal economic zone could benefit to existing players like GBL;
- Pledged shares by promoters;
- Increased competition in LST business could impact growth in top and bottom line;
- Delay in demerger process and/or in expansion/greenfield plans could lead to postponement of growth and affect stock valuations.
View and Valuation:
GBL has embarked on a number of initiatives to unlock/improve shareholder value. The loss making chemicals business is being demerged, existing LST business has seen an expansion recently, a new green field LPG terminal has been proposed to be set up at Goa and debt levels are being brought down. All these could lead to better efficiencies, profitability and leverage ratios and in turn higher return ratios apart from rise in topline and bottom line over the next 2-3 years.
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We feel investors could buy the stock at the CMP and add on dips to Rs. 76-79 band (~9.0x FY19E EV/EBITDA and 13.5x FY19E EPS) for sequential targets of Rs 121 (13.7x FY19E EV/EBITDA and 21.0x FY19E EPS) and Rs 155 (17.25x FY19E EV/EBITDA and 27x FY19E EPS). At the CMP of Rs 94.30 the stock trades at 10.8x FY19E EV/EBITDA and 16.4x FY19E EPS.