Recommendation from Manufacturing Sector

This section gives a recommendation of a stock having stock price below Rs 150 with sound fundamentals and expected to give handsome returns over a one-year time horizon.

BHANSALI ENGINEERING POLYMERS:CONTRIBUTING TO NATIONAL GROWTH

HERE IS WHY
✓Maintaining domain expertise in products
✓Petrochemical sector poised for a further leap
✓Debt-free with healthy dividend yield

The foundation of a strong nation in today’s era depends on how versatile its refineries are in using petrochemicals to the best advantage because petrochemicals have become the backbone of manufacturing, agriculture, healthcare, and many other sectors. In India, petrochemicals play a major role in driving the country towards economic prosperity. It is estimated that the growth trajectory of this sector shall continue its upward trend owing to the shifting consumer preferences, innovations happening in this sector, and rise in consumer demand.

The market size of chemicals and petrochemicals sector in India is around USD 215 billion and is expected to grow to USD 300 billion by 2025. Keeping the growth of the petrochemical industry in mind, our choice of low price scrip for this issue is Bhansali Engineering Polymers (BEPL). BEPL is a prominent Indian petrochemical company that manufactures Acrylonitrile Butadiene Styrene (ABS), a raw material used in various industries such as automobiles, home appliances and telecommunications. The company offers a variety of specialty grades and 1,200 colour shades, catering to various applications. It has a dedicated research and development team that develops applications quickly.

For over a decade, BEPL has been a trusted partner for manufacturers of automobiles, home appliances, telephones, and other products. Some of the major clients of the company include Bajaj, Exide, Fiat, Aquaguard, Beetel, VIP, Samsonite, BPL, Onida, Sanyo, Videocon, Voltas, Whirpool, Electrolux, Crompton, IFB, LG, Kenstar, Tata, Toyota and Yahama. In Q4FY24, on a consolidated basis, the company’s revenue decreased by 2.05 per cent YoY to ₹321.18 crore compared to ₹327.9 crore from the previous year’s same quarter. On a sequential basis, its revenue increased by 10.06 per cent.

The PBIDT excluding other income increased by 131.22 per cent to ₹51.07 crore YoY as compared to ₹22.09 crore from the previous year’s same quarter, while sequentially increasing by 8.98 per cent. Its net profit stood at ₹40.22 crore compared to ₹14.07 crore, a YoY increase of 185.77 per cent, while sequentially increasing by 0.39 per cent from ₹40.06 crore. Bhansali Engineering Polymers is poised for significant growth due to its strategic partnership with Toyo Engineering India for front-end engineering design (FEED) and capex cost estimation. This partnership ensures efficiency and cost-effectiveness in major capital projects.

Bhansali Engineering Polymer’s focus on manufacturing highly specialised engineering thermoplastics (ABS and SAN resins) allows for greater efficiency in production. The company achieved record production levels and 100.2 per cent capacity utilisation last financial year, demonstrating its ability to optimise its facilities. Additionally, its robust internal controls provide a solid foundation for managing future growth and expansion.

At TTM, Bhansali Engineering Polymers is trading at a PE of 13.4 times, which is higher than its three-year median PE of 8.1times. The company has maintained a healthy three-year average ROE and ROCE of 23.4 per cent and 33.5 per cent, respectively. It is debt-free and maintains a healthy dividend yield of 4.13 per cent. Considering the aforementioned factors, we recommend BUY.