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Buy This Multibagger Chemical Stock For A Target Price of Rs. 898 & 150% Dividend


Gujarat Heavy Chemicals Ltd (GHCL) is a chemicals-centred small-cap firm with a market capitalization of Rs 6,268.84 crore. The company's shares have risen from Rs 235.50 on the 4th of May 2021 to Rs 643.70 on the 4th of May 2022, 3:04 pm IST, representing a multibagger return of 173.33 per cent in a year. The Board of Directors recommended a total dividend of Rs 15 per share of Rs 101 each, or 150 per cent, for the fiscal year ending March 31, 2022, which will be paid on or after Monday, July 4, 2022, if accepted by the members at the upcoming Annual General Meeting. Arihant Capital has issued a buy call on the stock post Q4FY22 results, with a target price of INR 898.


Q4FY22 Result Highlights of GHCL According to Arihant Capital

Q4FY22 Result Highlights of GHCL According to Arihant Capital

  • Revenues from operation increased by 76.6% YoY/up 26.7% QoQ to INR 12,733 Mn and came in above our estimates of INR 12,371 Mn.
  • EBITDA increased by 112% YoY/up by 63% QoQ to INR 4,092 Mn and was above our estimates of INR 3,859 Mn.
  • Operating margins expanded by 537 bps YoY/ up by 715 bps QoQ to 32.1%.
  • Effective Tax Rate stood at 26.1% in Q4FY22 versus 25.9% in Q3FY22 and 27.3% in Q4FY21.
  • PAT increased by 147.1% YoY/up by 74.8% QoQ to INR 2,673 Mn and above our estimates of INR 2,434 Mn. PAT Margins expanded by 599 bps YoY/up by 577 bps QoQ to 21.0%.
  • Balance Sheet remained robust with Cash and Cash Equivalents of INR 2,435 Mn at the end of March 2022 versus INR 350 Mn in FY21.
  • Long Term borrowings reduced in FY22 and stood at INR 4,246 Mn versus INR 5,638 Mn in FY21.
  • It has recommended a total dividend of INR 15 per equity share of Face Value INR 10, i.e. 150% on the paid up equity capital. This includes regular dividend of INR 10 per share and Special Dividend of INR 5 per share for FY22.
  • Dividend will be paid on or after 4th July 2022, if approved in the upcoming Annual General Meeting.
  • The company has targeted a capital budget of about INR 5,049 Mn for FY23.
Buy for a target price of INR 898

Buy for a target price of INR 898

The brokerage has claimed that "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. International prices of soda ash is higher compared to local prices. Moreover, the company is expanding its capacity through brownfield and greenfield project, which will facilitate volume growth. It reported strong earnings growth in Q4FY22 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," said Arihant Capital.



The stock has been picked from the brokerage report of Arihant Capital. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.

Read more about: stocks to buy
Story first published: Wednesday, May 4, 2022, 15:21 [IST]
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