National Peroxide (one of our Street Beat picks) has posted third quarter results, with both sales and profit trending upwards. We had recommended the stock for the 8-21 February 2013 issue at Rs474. The stock closed at Rs479 today
We recently wrote about National Peroxide in our 21 February issue (now on stands). Its net sales for the third quarter ended December 2012 grew by 27% year-on-year (y-o-y) to Rs53.76 crore. Likewise, for the same period, operating profit grew 22% y-o-y, from Rs14.33 crore to Rs17.5 crore. The increase in operating profit was helped by an increase in the sales volumes of both hydrogen peroxide and hydrogen gas. Net profit grew by 34% y-o-y to Rs10.58 crore.
A detailed look into the company’s numbers on Moneylife database shows that the company exhibits a cyclical nature as far as fundamentals are concerned. For instance, its net sales have been see-sawing between growth and moderation. At the moment, it seems to be moderating slightly due to pressing economic circumstances. Despite this, its growth rate in net sales was a healthy 22%, though far below its three-month y-o-y growth rate average of 57%. Similarly net profit grew 22% y-o-y, less than the 115% y-o-y growth rate for the preceding three quarters. Despite its cyclical nature, its return on networth is an impressive 29%. But it is for the same reason that its valuation is low as demand for cyclical depend on perfect timing. The company’s market capitalisation is quoting at nearly four times its operating profit, which is attractive.
Earlier, last year there was a plant shutdown of 72 days from 11 April 2011 till 21 June 2011 for expansion of the plant during the previous year. National Peroxide has chalked out plans to expand capacity to 1,50,000 mtpa over the next few years. It gets its raw materials from Gas Authority of India (GAIL) and is heavily dependent on gas supply.
National Peroxide is a pioneer in India for peroxygen chemicals and is the largest manufacturer of hydrogen peroxide, which is used for bleaching, chemical synthesis, effluents.
National Peroxide closed at Rs479 on Bombay Stock Exchange (BSE), up 0.61% from its previous close.
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