Akzo Nobel India (previously known as ICI India) is a strong player in paints and chemicals business with over 100 years of presence in India. In 2008, Akzo Nobel NV, Netherlands took equity ownership of Imperial Chemical Industries, UK. At present, the company has two division namely paints and surface chemical;
During FY2012, Akzo commissioned two new plants – one in Hyderabad for decorative paints and another in Bangalore for coil coatings increasing its total facilities to 5 plants. The company is further looking to add one more Greenfield plant at Gwalior for decoratives and has planed a capex of Rs.150 crore over the next one year;
Akzo merged three parent owned unlisted entities in India with itself which led to increase in promoter holding to 68.9% from 59.6%. The company believes that the merger has created an integrated coatings and chemicals company, with significant synergies in several segments, namely, premium decorative, industrial and automotive coatings;
In July 2012, the company completed buyback of 13 lakh equity shares at Rs.920 per share which further increased the promoter stake to 70.8%. We believe that consolidation in the business and increasing promoter stake signals a strong case for de-listing;
The company registered 81.2% YoY growth in net revenue to Rs.1,988 crore and net profit grew by 14.3% YoY to Rs.202 crore during FY2012. During Q2FY2013, the growth momentum continued and the company reported 65% YoY increase in revenue to Rs.563 crore. However, the net profit declined by 10.4% to Rs.60.9 crore due to merger of companies (Akzo Nobel Coatings Pvt Ltd, Akzo Nobel Car Refinishes India Pvt Ltd and Akzo Nobel Chemicals India Ltd) which registered lower margins;
It has cash of Rs.1,077 crore or Rs.230 per share at the end of FY2012 which is around 24% of current market capital. We believe that the company may go for another round of buyback before eventually going for de-listing. Even if the company considers recent buy back price of Rs.920 per share, the stock can see 5.9% upward movement from current levels;
The company has increased the dividend payout to Rs.20 per share for FY2012 on the expanded equity base from Rs.18 in FY2011. At the current price of Rs.952, the stock is available at 22.7x FY2012 EPS of Rs.42 and 20.3x its FY2013E EPS of Rs.47 with a fair value of Rs.1,100 which is an upside of 15.5% from the current levels. We believe there will continue to be a significant upside in the stock considering higher dividend and possibility of de-listing;
No comments:
Post a Comment