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Kemrock Industries and Exports – SBI Caps

February 12, 2008

SBI Caps has initiated coverage on Kemrock Industries & Exports with a BUY rating. Kemrock is the world’s most integrated and comprehensive thermoset reinforced polymer composite solution provider. Kemrock high technology profile has been acquired by mastering multi fold technology processes and the ability of its technocrat promoters.

Kemrock has multifold processes – pultrusion, moulded, filament winding, centrifugal casting, pull winding, Resin Ttansfer Moulding and expanding process strategy in the
future – SMC, Vaccum assisted resin transfer moulding, VaccumBagging and Vaccuminfusion.

Kemrock specialize/use their own process technology (usually one type) and buy raw materials (resin, glass fibers, etc.) to make composites. Internationally, companies do not integrate backward to resin manufacture and do not have multi fold processes.

Kemrock’s CAPEX,
FY08 – Rs 150 crore
FY09 – Rs 1,012 crore
FY10 – Rs 100 crore

The company’s aggressive expansion plans will put the company amongst the top international competitors and improve profile via – Economy of scale benefit via multi processes. Various products and projects – capability to respond to
market needs.

Valuations and Recommendations:
Kemrock is expected to report a fully diluted EPS of Rs 42.3, 63.6 for FY08 and FY09 respectively. The Book Value Per Share is expected to be Rs 213 and Rs 592 at the end of FY08 and FY09.

The stock has corrected in the recent past. The stock is attractive at a P/E of 8.4x (FY09E). Rolling forward to FY10 EPS estimates, SBI Caps pegs the figure at Rs 176. We recommend really long term investors with a horizon of more than 24 months to make FRESH Purchase in Kemrock. Investors already holding the stock should also hold it for the next 18-24 months and then can consider booking profits.

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