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Ashika Stock Broking
Bodal Chemicals (Buy)
CMP: ₹60.95
Target: ₹94
Bodal Chemicals (BCL) is one of the leading manufacturers of dyes, dye intermediates and basic chemicals. Also, as a part of backward integration, the company had set up manufacturing facilities for sulphuric acid and its derivatives (basic chemicals), which commenced commercial operations from August 2010.
At the current market price of ₹60, the stock is trading at a P/E ratio of 6.5x FY15E. Stability in earnings stream and high margins (higher than FY13, but lower than FY14) could result in re-rating of the stock. With experience and expertise, well diversified portfolio and reputed and sizeable customer base globally, we feel BCL deserves to trade at better valuations especially in the present times when small-cap stocks with potential are being re-rated. We recommend ‘Buy’ with a target price of ₹94 (about 1.0x FY16E market cap / net sSales) for medium- to long-term investment.
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