vishnuvega
26-11-2007, 05:55 AM
ZUARI INDUSTRIES LTD. (ZIL)
Promoted in 1967 by United Steel Corporation (USA) and Birla Group, Zauri Industries Ltd. (ZIL) is among the leading manufacturers of fertilizers like urea, di-ammonium phosphates (DAP) and certain complex fertilizers. The company markets fertilizers in Goa, Maharashtra, Karnataka and parts of Andhra Pradesh.
The Fertilizer division lies at the core of ZIL's operation and accounts for majority of share. ZIL's fertilizer plant in Goa has an annual capacity of more than 946,200MT of fertilizer and comprises a single stream ammonia plant, a urea plant, an NPK plant and a DAP plant along with related onsite and offsite facilities for handling raw materials, end products as well as the generation of steam and captive power.
Industry Scenario
India is the third largest producer and consumer of fertilizer, which accounts for 12% of world consumption. The Indian fertilizer Industry, with the capacity of 121 lakh MT of Nitrogen and 56 Lakh MT of Phosphatic nutrient, is one of the largest in the world. The Indian Fertilizer Industry, with close to 56 large plants in the country, is engaged in manufacturing a range of fertilizers.
Demand growth has been steady for the fertilizer sector in past at 3-5% in last 20 years. India has largely depended on Import of Urea and other products due to domestic supply constraints.
Subsidiaries and Joint Ventures: Synergy to Boost Bottom-line Indian Furniture Products Limited (IFPL)
IFPL markets its products under 'ZUARI' brand with aggressive pricing and in order to strengthen the Office System segment, the company has introduced a new technology called Honeycomb technology and has also increased its offerings in terms of new designs.
Zuari Seeds Limited (ZSL)
ZSL is engaged in R&D, Production & Marketing of Hybrid Seeds of a wide range of crops. ZSL has been making significant progress in BT cotton development and has received government approval for the results of first stage trials of the company's BT hybrids.
Simon India Limited (SIL)
SIL, a wholly owned subsidiary of the Company, is engaged in providing engineering consultancy services.
Zuari Investments Limited
Zuari Investments Limited, a JV with Chambal Fertilisers & Chemicals Limited, is a depository participant with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL).
Zuari Indian Oil Tanking Limited (ZIOL)
ZIOL, a 50:50 JV between ZIL and Indian Oil tanking Limited (IOTL) has state-of-the-art terminalling facility for oil & petroleum products namely Naphtha, MS, HSD & SKO. The terminal situated at Goa with 64,000 KL tankage is 85 meters above the sea level with a 14 km long pig gable pipeline from Marmagao Port Trust (MPT). Apart from providing terminal ling services to Zuari Industries Limited for Naphtha storage, the terminal is providing services to Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation Limited for their storage and distribution requirements of petroleum products
Zuari Maroc Phosphates Limited (ZMPL)
ZMPL, floated as an SPV, is a 51:49 JV with Maroc Phosphors S.A. Morocco. It acquired majority stake in Paradeep Phosphates Limited (PPL) from the Government of India under the Scheme of Disinvestment.
Style Spa Furniture Limited
Style Spa Furniture (formerly Gautier India Limited)is a chain of retail furniture outlets, marketing furniture manufactured in their state of the art Factory situated near Chennai, and other furniture imported from across the world. Style Spa, with its network of over 55 outlets is the largest retail chain for furniture in the country, and in a short span of time has established itself as a name to reckon with. Style Spa retails furniture for the home, which includes bedroom, living room and dining room furniture, besides computer tables, shoe racks, wall cabinets etc.
Joint Venture with Israel Chemical Limited
ZIL has entered into Joint Venture Agreement(50:50) with Israel Chemicals Limited for establishment of water soluble NPK Fertilizer Plant with an initial capacity of 10,000 tones per year.
Investment holdings improves the valuation of the company :
ZIL holds 3.4 lac shares in Texmaco which at current valuation comes at Rs 55.76 cr, thereby having Rs 18/share. Similarly, Zuari investments, which is a 50% subsidiary of ZIL, holds 28.96 lakh shares of Texmaco, which are valued at Rs 475 cr. ZIL's 50% share comes to Rs 238 Cr, which would mean Rs 82 per share of investments.
Thus investments come to Rs (18+82) = Rs 100 per share. Prudence demands that these be valued at 50%, which gives you Rs 50 per share. Add to that the Rs 75 per share cash (as of March 2007) and you have Rs (100+75) = Rs 175 per share of cash or cash equivalents.
Then there are host of other subsidiaries. Indian Furniture Products Ltd, Zuari Seeds Ltd, Simon India Ltd, Zuari Indian Oil Tanking Ltd and Style SPA Furniture Ltd. Style SPA has around 90 branches in the country. We have not valued these companies at all in our investment argument.
Good location of the plants :
Both the plants, Zuari and Paradeep come with good locations. Paradeep Phosphates is located in the port town of the same name in coastal Orissa, with a sprawling 2,200-acre campus, where it has private jetty also.
ZIL main plant is strategically located near the Zuari river just 5 km away from the Goa Airport. Of the 1,100 acre land, the plant occupies around 130 acres and some portion is used by the Birla Institute of Technology and Science (BITS) Goa campus.
Natural Gas to be preferred stock for the manufacturing of Fertilizers
Natural gas is one of the cheapest feed stocks for the production of fertilizers. With the gas pipeline project on movement, we see increase in production of fertilizers. ZIL has been showing robust financial performance for the last two years, driven by better operational performance. Increase in Consumption of Food grains will lead to increase in demand of fertilizers& ZIL being among the major players in DAP segment would be an beneficiary of this demand. With the availability of Natural gas, on back of momentum in gas pipeline, we expect fertilizer's capacity to increase further.
We expect ZIL's revenue to grow on back of significant demand for fertilizer. At the CMP of Rs 315/- the stock trades at 5.5x it's First half annualised earnings. Considering the growth prospects going forward, we recommend an BUY (REITERATE) rating on the stock.
Promoted in 1967 by United Steel Corporation (USA) and Birla Group, Zauri Industries Ltd. (ZIL) is among the leading manufacturers of fertilizers like urea, di-ammonium phosphates (DAP) and certain complex fertilizers. The company markets fertilizers in Goa, Maharashtra, Karnataka and parts of Andhra Pradesh.
The Fertilizer division lies at the core of ZIL's operation and accounts for majority of share. ZIL's fertilizer plant in Goa has an annual capacity of more than 946,200MT of fertilizer and comprises a single stream ammonia plant, a urea plant, an NPK plant and a DAP plant along with related onsite and offsite facilities for handling raw materials, end products as well as the generation of steam and captive power.
Industry Scenario
India is the third largest producer and consumer of fertilizer, which accounts for 12% of world consumption. The Indian fertilizer Industry, with the capacity of 121 lakh MT of Nitrogen and 56 Lakh MT of Phosphatic nutrient, is one of the largest in the world. The Indian Fertilizer Industry, with close to 56 large plants in the country, is engaged in manufacturing a range of fertilizers.
Demand growth has been steady for the fertilizer sector in past at 3-5% in last 20 years. India has largely depended on Import of Urea and other products due to domestic supply constraints.
Subsidiaries and Joint Ventures: Synergy to Boost Bottom-line Indian Furniture Products Limited (IFPL)
IFPL markets its products under 'ZUARI' brand with aggressive pricing and in order to strengthen the Office System segment, the company has introduced a new technology called Honeycomb technology and has also increased its offerings in terms of new designs.
Zuari Seeds Limited (ZSL)
ZSL is engaged in R&D, Production & Marketing of Hybrid Seeds of a wide range of crops. ZSL has been making significant progress in BT cotton development and has received government approval for the results of first stage trials of the company's BT hybrids.
Simon India Limited (SIL)
SIL, a wholly owned subsidiary of the Company, is engaged in providing engineering consultancy services.
Zuari Investments Limited
Zuari Investments Limited, a JV with Chambal Fertilisers & Chemicals Limited, is a depository participant with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL).
Zuari Indian Oil Tanking Limited (ZIOL)
ZIOL, a 50:50 JV between ZIL and Indian Oil tanking Limited (IOTL) has state-of-the-art terminalling facility for oil & petroleum products namely Naphtha, MS, HSD & SKO. The terminal situated at Goa with 64,000 KL tankage is 85 meters above the sea level with a 14 km long pig gable pipeline from Marmagao Port Trust (MPT). Apart from providing terminal ling services to Zuari Industries Limited for Naphtha storage, the terminal is providing services to Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation Limited for their storage and distribution requirements of petroleum products
Zuari Maroc Phosphates Limited (ZMPL)
ZMPL, floated as an SPV, is a 51:49 JV with Maroc Phosphors S.A. Morocco. It acquired majority stake in Paradeep Phosphates Limited (PPL) from the Government of India under the Scheme of Disinvestment.
Style Spa Furniture Limited
Style Spa Furniture (formerly Gautier India Limited)is a chain of retail furniture outlets, marketing furniture manufactured in their state of the art Factory situated near Chennai, and other furniture imported from across the world. Style Spa, with its network of over 55 outlets is the largest retail chain for furniture in the country, and in a short span of time has established itself as a name to reckon with. Style Spa retails furniture for the home, which includes bedroom, living room and dining room furniture, besides computer tables, shoe racks, wall cabinets etc.
Joint Venture with Israel Chemical Limited
ZIL has entered into Joint Venture Agreement(50:50) with Israel Chemicals Limited for establishment of water soluble NPK Fertilizer Plant with an initial capacity of 10,000 tones per year.
Investment holdings improves the valuation of the company :
ZIL holds 3.4 lac shares in Texmaco which at current valuation comes at Rs 55.76 cr, thereby having Rs 18/share. Similarly, Zuari investments, which is a 50% subsidiary of ZIL, holds 28.96 lakh shares of Texmaco, which are valued at Rs 475 cr. ZIL's 50% share comes to Rs 238 Cr, which would mean Rs 82 per share of investments.
Thus investments come to Rs (18+82) = Rs 100 per share. Prudence demands that these be valued at 50%, which gives you Rs 50 per share. Add to that the Rs 75 per share cash (as of March 2007) and you have Rs (100+75) = Rs 175 per share of cash or cash equivalents.
Then there are host of other subsidiaries. Indian Furniture Products Ltd, Zuari Seeds Ltd, Simon India Ltd, Zuari Indian Oil Tanking Ltd and Style SPA Furniture Ltd. Style SPA has around 90 branches in the country. We have not valued these companies at all in our investment argument.
Good location of the plants :
Both the plants, Zuari and Paradeep come with good locations. Paradeep Phosphates is located in the port town of the same name in coastal Orissa, with a sprawling 2,200-acre campus, where it has private jetty also.
ZIL main plant is strategically located near the Zuari river just 5 km away from the Goa Airport. Of the 1,100 acre land, the plant occupies around 130 acres and some portion is used by the Birla Institute of Technology and Science (BITS) Goa campus.
Natural Gas to be preferred stock for the manufacturing of Fertilizers
Natural gas is one of the cheapest feed stocks for the production of fertilizers. With the gas pipeline project on movement, we see increase in production of fertilizers. ZIL has been showing robust financial performance for the last two years, driven by better operational performance. Increase in Consumption of Food grains will lead to increase in demand of fertilizers& ZIL being among the major players in DAP segment would be an beneficiary of this demand. With the availability of Natural gas, on back of momentum in gas pipeline, we expect fertilizer's capacity to increase further.
We expect ZIL's revenue to grow on back of significant demand for fertilizer. At the CMP of Rs 315/- the stock trades at 5.5x it's First half annualised earnings. Considering the growth prospects going forward, we recommend an BUY (REITERATE) rating on the stock.