Kotak Securities' research report on GHCL LTD
The Inorganic chemical segment performance impacted by lower volume (maintenance shutdown) and MTM forex loss of Rs70mn, which offset the benefit of higher realisation (Rs380/tonne). Textile segment operating performance improved sequentially supported by improvement in the home textile business which reported EBITDA of Rs30mn as compared to loss in the previous quarter. Management expects the global soda ash market to grow at 2.5% annually and demand likely to remain strong in India (grew 11% in FY18E). Anti-dumping duty (ADD) on soda ash is extended for six months from China and US, as sunset review is under process, while ADD on Turkey and Russia is extended for 1 year.
Outlook
Given the environmental issues in China (as there are still some soda ash plants in East, South and Central China which needs to be relocated or upgraded), the industry expects the soda ash production to decline in China and tightness to prevail in the Industry. Backed by strong realisation, we expect soda ash business to deliver strong performance and the recovery in textile business is expected to provide support to the earnings in the medium term. Maintain BUY rating, with a target price of Rs330.
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