Styrolution ABS – MNC due for rerating

Call was addr by Myung Suk Chi MD & CEO.Highlights by Capital Mkt
The company has capacity of about 110000 MT of ABS and is operating around 75% of installed capacity.Of the total sales, about 87% is ABS sales and rests are SAN products.In terms of market share, overall, the company has market share of about 44% in ABS in India and about 50% in SAN. Almost 75% of SAN produced by the company is consumed in house.
The company had an inventory gain in June’15 quarter and inventory loss in Sep’15 quarter. Net to net things mostly even out in H1 FY’16. At steady state of inventory, the gross margin of the company is around 28%.Management expects the merger with Styrolution Pvt ltd to be completed by end of Mar’16.As per the management, they are not focused on exports and their entire focus remains on India.After Styrolution ABS, Bhansali Engineering is the 2nd largest player with about 20% market share and about 25% of total demand is met through imports.
Automobiles and Consumer durable account for significant demand for company’s final product, ABS. within automobiles,2 Wheelers particularly bikes account for major demand followed by passenger car vehicles. All consumer durables be it refrigerator, washing machine, mixer etc require ABS.The slower rural economy has affected the demand of bikes and consumer durables. As per the management, there is a demand and demand will increase if the prices of raw material remains steady.
Going forward, new products and mixtures have been aimed and will be tested in H2 FY 2015-16. These products have higher realizations and increase the overall productivity of consumers as well.Overall, for FY’16, it’s difficult to say the revenue growth as it depends upon crude oil prices, but management expects strong performance to continue.