Ganesh Polytex catches the eye because it has been growing at a scorching pace. With a market capitalization of less than Rs. 100 crores, Ganesh Polytex is a small cap and does not fit into the radar of institutional investors. However, that is no reason for retail investors to shun Ganesh Polytex.
Ganesh Polytex‘s 3 year CAGR Sales has grown at about 47% while its 3 year CAGR profit is about 67%. Ganesh Polytex‘s Return on Equity is about 27% which is quite attractive.
Ganesh Polytex‘s business is to recycle used PET bottles and convert it into Polyester staple fibers and Yarns. Ganesh Polytex set up a plant in 1995 to manufacture “green fiber” or recycled PSF from used PET bottles with a capacity of 6,000 tpa at Kanpur. This plant was imported from South Korea with technical know-how. Over the years the capacity has grown three fold to 18000 tpa. Ganesh Polytex set up a second Plant in 2006 at Rudrapur, Uttaranchal with a waste PET bottle processing capacity of 7,200 tpa. By 2008, Ganesh Polytex expanded the capacity to 21,600 tpa. There was another expansion in March10 which expanded capacity to 39,600 tpa taking the overall capacity to 57,600 tpa.
| (Rs cr) | Dec 2010 | Dec 2009 | YOY |
|---|---|---|---|
| Operating Income | 81.60 | 52.57 | 55.22 |
| Total Expenses | 71.52 | 46.40 | 54.14 |
| Operating Profit | 10.08 | 6.17 | 63.37 |
| Other Income | 0.00 | 0.25 | -100.00 |
| PBDIT | 10.08 | 6.42 | 57.01 |
| PBT | 5.66 | 2.86 | 97.90 |
| Adjusted Net Profit | 5.01 | 2.85 | 75.79 |
Ganesh Polytex has stated that it is contemplating setting up a Plant to manufacture Recycled Chips and Recycled Partially Oriented Yarn (POY) of about 15,000 tpa from PET Bottle waste and Spun Yarn with capacity of 5,000 tpa from Recycled Fibre. Ganesh Polytex also intends to acquire yarn spinning capacity on job work/lease basis or taking over existing units to convert the recycled PSF into value added yarn.
Ganesh Polytex‘s results for the Quarter ended December 2010 as well as the 9 month period ended 31st December 2010 were very attractive. The sales for the Q3 FY 2011 increased 55% to Rs. 81.60 crores from Rs. 52.56 crores in Q3 FY 2010. The Net Profit soared 75% to Rs. 5.01 crores in Q3 FY 2011 as compared to Rs. 2.85 crores in Q3 FY 2010.
| 3 Yr CAGR Sales (%) | : 46.95 | 3 Yr CAGR Profit (%) | : 67.13 |
| Debt to Equity Ratio (x) | : 1.71 | Net Profit Margin (%) | : 4.53 |
| Return on Equity (%) | : 27.50 | EV to EBITDA (x) | : 6.17 |
Ganesh Polytex‘s results for the 9 month period were equally encouraging. The sales were Rs. 184.31 crores as compared to Rs. 144 crores while the Net profit was Rs. 11.50 crores as compared to Rs. 5.89 crores.
Ganesh Polytex informed in January 2011 that IFCI Venture Capital Funds Ltd had provided a letter of intent to Ganesh Polytex Limited for subscribing to 15 lakh Optionally Convertible Debentures (OCDs) of Rs 90/- each of the Company on preferential basis, convertible into equal number of Equity Shares of Rs. 10/- each of the Company at a premium of Rs. 80/- per share. It was stated that IFCI Venture Capital would be making the aforesaid investment through its Green India Venture Fund, which has a corpus of Rs 330 crores for investing in companies engaged in clean development mechanism, with Ganesh Polytex Limited being one of them.
Ganesh Polytex‘s diluted EPS for the 9 month period ended December 2010 stood at Rs. 7.73 as compared to Rs. 5.58 in the 9 month period ended December 2009. Ganesh Polytex‘s diluted EPS for the year ended 31.3.2010 was Rs. 8.19.
At the TTM EPS of Rs. 8.19, Ganesh Polytex‘s CMP of Rs. 69 is discounted 8.4 times. Assuming the diluted EPS for FY 2011 (before the IFCI Venture Capital issue) is Rs. 10.30, the PE Ratio is 6.69 which is not at all unreasonable for a company with the growth track record and prospects of Ganesh Polytex.
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