Rs 17.50/Share Dividends: Prabhudas Lilladher Recommends Buy On Smallcap Chemical Stock For Rs 640 TP

Leading chemical company, GHCL's share price gained as much as 1.4% on Thursday, outperforming benchmarks Sensex and Nifty 50. GHCL shares are currently above Rs 540 and brokerage Prabhudas Lilladher believes there is a potential for upside in the smallcap. This chemical stock has witnessed significant erosions in the past, which has seemed to flavour out.

The brokerage recommends buying or accumulating GHCL shares for a target price of Rs 640 levels. Notably, the company is among high dividend-paying stocks.

At the time of writing, GHCL shares traded at Rs 544.15 apiece, up by 1.4% on BSE with a market cap of Rs 5,201.30 crore. The stock was near its day's high of Rs 544.35 apiece.

In the past five trading sessions, GHCL shares gained by nearly 5%. However, its monthly performance dropped by over 5.4% as of now.

Vaishali Parekh, Vice President - Technical Research, Prabhudas Lilladher said, "The stock after the decent erosion has bottomed out and taken support near the 520 zone indicating a decent pullback with a positive bullish candle pattern on the daily chart. The stock has moved past the significant 200 period MA of 534 level improving the bias and further rise is anticipated."

Further, she added, "The RSI also has indicated a trend reversal from the highly oversold zone and has signalled a buy with much immense upside potential visible from current levels. We suggest buying and accumulating the stock for an upside potential target of 640 levels keeping the stop loss near the 515 level."

Recently, India Ratings & Research has withdrawn the ratings assigned for issuance of Commercial Paper (CP). The Company had voluntarily requested such withdrawal since the Company has not raised Commercial Paper for the last 2-3 years and given the present financials and cash flow position of the Company, there will not be a requirement to raise CP in the next 2-3 years.

Furthermore, CARE Ratings re-affirmed its long-term bank facilities rating on GHCL at 'AA- Stable', while CRISIL Ratings revised its outlook to positive from stable while assigning an 'AA-' rating.

Coming to dividends, as per Trendlyne data, GHCL has delivered a whopping 26 dividends since August 2000. In the past 12 months, GHCL paid an equity dividend of 175% amounting to Rs 17.50 per share.

At the current price level, GHCL has a dividend yield of 3.22%.

During Q2FY24, GHCL's net profit declined by 51% to Rs 143 crores as compared to Rs 291 crores in the Q2 FY23 and Rs 426 crores for Q1FY24. While net revenue was at Rs 817 crores as compared to Rs 1183 crores in the corresponding quarter of previous year and Rs.1029 crores for Q1FY24.

On November 7, 2023, R S Jalan, Managing Director, GHCL said, "Going forward, we have ambitious growth plans in order to maintain this trajectory. These include Greenfield expansion, vacuum salt project, product basket expansion and salt yield improvement among others. We are certain that once completed, these projects will accelerate our growth momentum and position us among the top-tier industry leaders."

Incorporated in October 1983, GHCL is the largest manufacturer of Soda Ash at a single location in the Country.

In the Chemicals sector, the company manufactures Soda Ash (Anhydrous Sodium Carbonate), a major raw material for detergents, glass & ceramics industries and Sodium Bicarbonate (baking soda). The company has a Soda Ash manufacturing plant at Sutrapada in Gujarat with an installed production capacity of 12 Lakh MTPA and is in the process of expanding it by another 500 Thousand MTPA by the end of 2025. GHCL Soda Ash is available in two grades -light and dense grade and is marketed in India under the brand name 'LION'. GHCL also has lignite mines at Khadsaliya in the Bhavnagar district of Gujarat to supply the raw material needed for the production of Soda ash. GHCL also produces around 0.12 MTPA of Sodium Bicarbonate which is an important raw material for industries like bakery, pharma, fire extinguisher manufacturing, cleaning agents etc.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.