Financial Daily from THE HINDU group of publications
Sunday, Feb 26, 2006
Financial Daily from THE HINDU group of publications Sunday, Feb 26, 2006 |
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Investment World
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Stocks Markets - Recommendation Savita Chemicals: Buy Alagappan Arunachalam
The company is likely to maintain healthy growth in its lubricants and transformer oil businesses for the next couple of years. Double-digit growth in the automobile industry, driven by increasing disposable incomes and low-cost financing for vehicles, will trickle into the demand for lubes. As investments flow into the power sector to bridge the demand-supply gap, there will be ample opportunities for Savita's transformer oil business.
Ahead of peers
Despite being a late entrant, Savita Chemicals has outpaced peers in the industry by maintaining a consistent growth in excess of 20 per cent-plus. Savita Chemicals has been ramping up the capacity of its transformer oil business, which has had robust growth of 30 per cent over the last three years. Large order-book positions in the power equipment point to emerging growth opportunities for Savita's transformer oil business. Though there is significant potential for revenue growth, the company's earnings are tempered by volatility in the forex market and fluctuations in crude oil prices. Though Savita Chemicals faces margin pressure with prices of crude oil hovering around $60 a barrel, it has been successful in passing on a part of the rise in input costs to the user industry. Buy the stock with a one/two-year perspective.
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