GHCL Ltd. is a mid-cap company in the chemical industry with a market valuation of Rs. 6,071.13 crore. An essential raw ingredient for the glass and ceramics industries, soda ash (anhydrous sodium carbonate), and sodium bicarbonate (baking soda) are produced by the firm in the chemical industry. GHCL also operates lignite mines in Khadsaliya in Gujarat’s Bhavnagar district to provide the raw materials required to make soda ash. Sodium bicarbonate, a crucial raw ingredient for sectors like baking, pharmaceuticals, the manufacture of fire extinguishers, cleaning products, etc., is another product that GHCL manufactures at a capacity of about 65 thousand MTPA.
The company has declared its Q1FY23 results, and the revenue from operations reached ₹1,371 Cr which was ₹699 Cr in Q1 FY22, a YoY growth of 96%. The operating expenses of the company reached ₹942 Cr in Q1FY23 which was ₹540 Cr in Q1 FY22, a growth of 75%. The EBITDA of the company reached ₹429 Cr which was ₹159 Cr in the same quarter last year a YoY jump of 169% whereas the EBITDA margin reached 31.3% compared to 22.8% recorded in the same quarter in the last year a YoY growth of 8.48%. The company reported an EBIT of ₹399 Cr in Q1FY23 which was ₹131 Cr in the same quarter last year, a YoY growth of 204%. Profit Before Tax (PBT) for the company increased by 280 per cent year over year (YoY) to Rs. 439 Cr. in Q1FY23 from Rs. 116 Cr. in the same quarter of the previous financial year. In Q1FY23, the firm recorded a Profit After Tax (PAT) of ₹339 Cr, up from ₹85 Cr in Q1FY22, representing a YoY rise of 300 per cent.
Commenting on the Q1 FY23 performance, Mr. R. S. Jalan, MD said “We have made a healthy start to the new financial year by delivering an all-round strong financial performance. Top-line grew by 96%, while EBITDA improved by 169% and recorded 3x growth in PAT during Q1 of FY23. The growth momentum continued across businesses with strong demand which led to healthy offtake across both Inorganic chemicals business and Textiles segment (Spinning).”
For the inorganic chemical segment of the company, revenue increased by 108% Y-o-Y and 10% Q-o-Q backed by volume expansion and realization gains and EBITDA improved by 226% Y-o-Y. Mr. R. S. Jalan said “We witnessed solid demand trajectory in the key end user categories combined with better realization gains. We undertook price hikes during the quarter to offset the rising cost pressure and the same has been well absorbed by the industry. Based on the current demand-supply dynamics, we remain optimistic on continued growth in Inorganic Chemicals.”
For the textiles spinning segment, the company’s revenues grew by 60% Y-o-Y and were stable against Q-o-Q, driven by strong contribution from value-added products and firm yarn pricing and EBITDA margin came to 23.5%. Mr. Jalan said “Cotton and Yarn prices remained elevated during the quarter which is now gradually getting normalized. Our focus on value added offerings is providing us impetus to drive gains in medium to long term. Overall, we are well poised to realise our long-term growth aspirations and deliver superior gains. Proposed demerger of the spinning business is a step in right direction that will unlock value for all stakeholders.”
After, robust Q1FY23 earnings, the brokerage firm Arihant Capital is bullish on the shares of GHCL Ltd and has set a target price of INR 898 which would be an all-time high for the stock. The brokerage has said “The global and domestic soda ash industry is witnessing supply-demand imbalance. Additionally, the ongoing Ukraine-Russia conflict has further tightened the domestic market, thus supporting price growth. The company is expanding its capacity through brownfield and greenfield project, which will facilitate volume growth. It reported strong earnings growth in Q1FY23 and we believe that the growth trajectory will continue in FY23, facilitated by supportive industry dynamics. We value the overall company on a SOTP basis, factoring its Chemical and Textile business. We appraise the base business of Chemicals on EV/EBITDA multiple of 7x its FY24E EBITDA and arrive at a fair value of INR 800 per share. The Textile business is valued by applying 25% discount to its replacement cost, yielding per share value of INR 98. Accordingly, we maintain our BUY rating on the stock with the Target Price of INR 898 per share.”
On the NSE, today the stock closed at ₹633.00 apiece, down by 1.72% from the previous close. In the last 5 years, the stock has given a multibagger return of 169.42% and in the last 1 year, the stock has gained 71.48%. On a YTD basis, the stock has surged 67.55% so far in 2022. The stock had touched a 52-week-high of ₹695.60 on 27th July 2022 and a 52-week-low of ₹310 on 23rd August 2021.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.