Chemfab Alkalis
Chemfab Alkalis opened the day for trading today at Rs.82 and soon zoomed up 20%, hitting the upper circuit filter at Rs.91. This is a new 52-week high. The stock hit the roof after it announced very good numbers for Q3FY13. The company posted a QoQ 16% rise in consolidated net sales at Rs.31 crore. And despite a 16% rise in operating expenses, the company posted a 40% surge in net profit, which YoY was up by a whopping 133% at Rs.7 crore. Its raw material cost was particularly up 56% sequentially. The point to be noted here is that for FY12, it had posted a net profit at Rs.7.47 crore and its net profit in current 31st Dec’12 is already much higher at Rs.17 crore.
The company has little or no debt. Its biggest expense is on power and fuel costs. Its equity is tiny at Rs.4.59 crore, and its EPS for 9MFY13 was at Rs.19 (face value Rs.5) discounting the current price less than 5 times. No new caustic soda plants are coming up and that is the main reason which drives the price, though it has been weak for some time now. Worldwide the membrane cell technology represents about 20% of production and nearly all new investment are in chloralkali production. Its business is shrouded in complete unpredictability and that explains the low discounting.