Stock Review: Gulshan Polyols

Gulshan Polyols is a low profile company. It is one of the largest manufacturers of sorbitol and precipitated calcium carbonate. Sorbitol is a substitute for sugar and it is mainly used as a sweetener. Precipitated calcium carbonate is mainly used by paint industry, paper industry, rubber and plastic industry.

This company has got four manufacturing plants one in UP, one is Himachal, one is Gujarat and this has got an online precipitated carbon plant at one of the customers site. The company has got a capacity of about 45000 tonne per annum of sorbitol and over 1 lakh tonne per annum of calcium carbonate. It has got a very good client base, in fact all major companies in FMCG, be it paper and pharma, most of the big names are the customers of the company.

If you look at the financials of the company, FY10 sales were about Rs 208 crore, PAT was about Rs 12.7 crore and cash profit was about Rs 28 crore. For Q1 there has been a 22% growth in sales, the sales were about Rs 58 crore, the PAT is up by 25% to Rs 4.3 crore and cash profit is Rs 8 crore. It has got a small equity of about Rs 4.17 crore. EPS on trailing 12 month basis is close to Rs 17 and cash EPS is close to Rs 35.

The stock is currently available at a price of about Rs 105, which means it is discounting the cash EPS by three times and earning per share by about 6 times, which is low for a company. It is a large manufacturer where the potential of growth is good, where the user industry is doing well. Also the company has been regularly paying dividends. The promoters shareholding at Rs 64-65% also inspires confidence. I believe this is one of the undervalued stocks where it's been ignored by the market in spite of steady performance and I think it's capable of returning about 50-60% over a year's time.