Aug 4, 2010

Gayatri Bio-organics Ltd. : Buy / Outperformer / Multibagger / Penny stock / Growth prospects and Sell/hold/analysis of Be and Make



gayatri bio-organics ltd.                                -- be and Make


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CMP: 13.96                                                 Recommendation: BUY
BSE code: 524564                                        ISIN: INE052E01015
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Investors with a long-term perspective and a high-risk appetite can buy this stock. Investors can take small exposure in the stock, considering the company's ability.

Company background:
Gayatri Bio-organics, previously called Gayatri Starchkem Ltd, was started in 1993. It is one of the largest manufacturing units of Starch, Liquid Glucose Sorbitol and its allied products in south India with a wide distribution network across the country.

Gayatri BioOrganics Limited is located at Nandi kandi village in Medak District of Andhra Pradesh, 65 KM from Hyderabad. The current capacity of the plant is 8550 MTPA. In the year 1998 Gayatri Bio-organics choose to integrate backwards and started 150 MTPD of maize crushing plant.
Incorporated on 2 Dec.'91, and promoted jointly by T V Sandeep Reddy and D S P Reddy and associates, Gayatri Starchkem Ltd., formerly known as Starchem Industries Ltd., is engaged in the manufacture of sorbitol with an installed capacity of 8550 tpa, it has a technical collaboration with Lurgi Oil Gas Chemie, Germany, for transfer of know-how, to manufacture sorbitol by adopting state-of-the-art low-pressure hydrogenation technology. Sorbitol is used in tonic/liquid formulations, toothpastes, cosmetic products like face creams and lotions, in tobacco processing for cigarettes, and in the paint, leather, paper, textile and food industries, etc. Sorbitol is more immune to bacteriological degradation than sugar, and is less vulnerable to mould growths than most other humectants and plasticising materials. The company came out with a public issue in Apr.'94 to part-finance a project to manufacture 8550 tpa of sorbitol. To achieve economies of scale in the manufacture of sorbitol, reduce raw material cost and improve quality, the company has embarked by setting up a starch project, as a backward integration project to the existing sorbitol plant with a rated capacity of 150 tpd at a capital cost of Rs 27 cr. The trial production has commenced on June, 1998 and commercial production of strach powder was commenced since august 1998 after installation of balance equipments by the end of July, 1998. During 1998-99, the Company has been awarded ISO 9002 Certificate for Sorbitol division. The company is also in process of implementing ISO 9002 standards for Starch division. Due to the high price of Furnace Oil, the company is installing coal fired husk based boiler, which will be operational by July 2000 end. Since networth has been fully eroded the company has been referred to BIFR and the Board has appointed IDBI as operating agency.

FUTURE PROSPECTS:

Gayatri BioOrganics Limited is planning to expand its present capacities of sorbitol from 8550 TPA to 17000 TPA and Maize Crushing from 54000 MTPA to 180000 MTPA during the next year. The company also plans to set up of a Co-Gen. plant, 6MW for in House. With this expansion the capacities of the company is triple its production.

Gayatri Bio-organics has formed a new alliance with Fursa Alternative Strategies LLC, which has recently acquired 42.63 percent equity in Gayatri Bio-organics Limited for Rs.18.5crore Additional Rs.35crore will be invested in Gayatri Bio-organics for the expansion and modernization of the existing production facilities and to add new product lines.

Current products:

  1. Sorbitol: Sorbitol a hexavalent sugar alcohol is a common constituent in many edible fruits. Although known since many decades, it could not find any commercial applications, as its extraction from fruits was very expensive. Its importance was recognized later only after the large scale economical manufacture of sorbitol from the commercially available glucose became possible by catalic reactions with hydrogen.
  2. Starch: Maize starch is basically a carbohydrate, which is in white powder form. Maize starch has various direct and indirect uses in many industries. Maize starch has a low ash and protein. Our maize starch is extracted from Hybrid corn varieties, which are available near, by our plant. Maize starch is used in food, paper, pharma and Textile industries.
  3. Corn Fiber: Fiber is a corn byproduct with less protein content. CORN FIBRE is mainly rich in cellulose and mineral matters, Also is used in cattle feed as an ingredient as it is rich with vitamins and fats
  4. Liquid Glucose: Liquid Glucose also known as Corn Syrup or Glucose Syrup, is one of the maize extracts. Liquid Glucose is obtained by the enzymatic conversion of starch at 105o C of temperature. The alternative processes are also there which may vary in the percentage of other sugar form levels in the resultant.
Along with the above products company is having gluten, germ products also.

SECTOR OUTLOOK:
The Indian starch industry is a sunrise sector and at a stage where it has little to lose. Hardly 40 starch products are made in the country compared with over 500 in the global market. The industry's size is smaller than its international peers. Starch production in the country is around 18 billion tonnes with 65 per cent coming from organized players. These units mainly depend on corn or maize as basic raw material. Their cause has been helped by the rapid rise in domestic production of maize.
In last three-four years, maize production has topped 15 million tonnes (mt). Though output dropped to 16.3 mt last year, against a record 19.7 mt the previous year, there has been no shortage as export demand was lower. For the coming year, reports from Andhra Pradesh, Karnataka and Bihar are encouraging. Companies that produced starch seemed to have fared well this year.
Demand is rising, no doubt. But the per capita consumption in the country is lower than 1 kg compared with 64 kg in the US or the global average of 6 kg. Haven't we seen an explosion in coffee consumption in the last few years? There is no doubt that such a thing will be witnessed in the starch sector too.
For the kharif season, the Centre has raised the minimum support price for maize by Rs 40 a quintal to Rs 880. But prices are around Rs 1,000. Therefore, the raise is unlikely to have a major impact and the prices are seen stabilizing in the short to medium term.
Therefore, stocks of starch manufacturing firms could be a safe bet in the medium and long term.
Recent Quarterly results:

Sales rise 54.75% to Rs 19.22 crore Gayatri BioOrganics reports net profit of Rs 0.76 crore in the June 2010 quarter Gayatri BioOrganics reported net profit of Rs 0.76 crore in the quarter ended June 2010 as against net loss of Rs 0.12 crore during the previous quarter ended June 2009. Sales rose 54.75% to Rs 19.22 crore in the quarter ended June 2010 as against Rs 12.42 crore during the previous quarter ended June 2009.


Particulars
Quarter Ended

Jun. 2010
Jun. 2009
% Var.
Sales
19.22
12.42
55
OPM %
9.73
4.35
124
PBDT
1.52
0.61
149
PBT
0.76
-0.12
LP
NP
0.76
-0.12
LP



SHARE Holding:


(in %)
Promoter
42.63
Fursa Mauritius SPV 1
42.63
DII
1.19
Others
13.55
Total
100.00




CONCLUSION:
The company is from the ‘Gayatri group’ which already proved their reliability. Now, Gayatri projects are a major infra and power company. Some of the big guys of Gayatri projects are promoters of this company. In my view, stock is fundamentally excellent and one can buy it “in small lots” and can hold it for long term without any second thought. The stock may or may not rise in the short term but it is a multi-bagger stock for the long term say 24 months period. After expansion of sorbitol and maize crushing capacities, Gayatri Bioorganics is also setting up 6 MW co-generation power plant which can improve their margins in the upcoming months. The company has also formed an alliance with Fursa and is expected to triple the production in the coming months. With good crop prospects for maize and corn — the basic raw material — in the current year, Gayatri Bio looks attractive when aimed for the long term.
With thanks
Be and make
For such more reports please visit: http://stockstowin.in/

Disclaimer: Before investing please do your own analysis and research. I tried to summarize all the recent events with my own views they may end with negative or positive hence do your good work without fail before investing. I have collected the news or information from various sources and the sources may or may not be the authorized hence they can be proved wrong. Hence, please do your own analysis and research before going to take my views. I strongly recommend or advice to consult the financial advisor or analyst before taking the decision. It is safe to assume that I or my followers or my friends etc., have positions in this stock.

19 comments:

zen said...

dear be and make...excited by seeing a recommendation from you after a very long time.
pls keep doing this good work sir.
may god bless you
regards
senthil

Be and Make said...

Dear senthil – Thanks for your good words. As I was expected markets are trading in a narrow range and looking for a breakout. So, it is the time to re-construct the portfolio. One can have 5-10% stake in small stocks like gayatri bio. Don’t expect too much in this counter in very short term.

With thanks
Be and make

Heart said...

Sir,

Under company background it is mentioned the company is installing a coal fired husk based boiler, which will be operational by July 2000 end.

Is it already done in 2000 or some writing error. Kindly clarify.

Regards.

Manju said...

Dear Be and Make

Thank you this report.

Manju_berlin

Be and Make said...

dear Heart - What is written is right. Previously the company is sick company. After the change in management, the CAPEX took place and likely to post good set of numbers in the upcoming quarters.
with thanks
be and make

Be and Make said...

Dear Manju - Thanks a lot:

How you are going on... expecting everything fine for you.

with thanks
be and make

Manju said...

Dear Be and Make

I am doing fine. Hope same with you.

Gayatri bio i am unable to buy in ICICDirect, it say "Recourse not Available". I give a complaint. Hope they will react this month.

Thanks .

Vijay Chandrakar said...

Dear Be and Make,

Thanks for the update. I have two questions:
1. What is the source of the funds for the capex? Is it the equity sell off?
2. In the past, they have been unable to expand using the IPO money. What is different this time?

Be and Make said...

Dear manju - Dont take much exposure in this stock as i clearly mentioned in my report. It should be in small lots not exceeding the 5% of your total portfolio.

with thanks
be and make

Be and Make said...

Dear Vijay - They have already diluted the equity. FIIs pumped decent amount of money in this company and are holding at par with the promoters.
Now, the whole management is changed and are in the hands of the "Prestigious Gayatri Group"

With thanks
be and make

Vijay Chandrakar said...

Oh Ok..thanks Be and Make for the prompt reply.

I am sorry to ask this question in this forum. but I would like to know if concurrent infra is still a hold or its time to exit.

Regards,
Vijay

Vijay Chandrakar said...

Dear Be and Make,

Two more questions.
1.When did this change of management happen?
2.If I am correct, the FII funding happened in 2008. Till now what has been the development on the capex?

Thanks in advance for your reply.

Regards,
Vijay

Be and Make said...

Dear Vijay - Yes, you are right. Capex already completed so we can expect some good set of numbers in the upcoming years. In my view, i will rate this stock only 3 star hence i recommended to add in small lots not exceeding the 5% of the total portfolio value. We need to have lot of patience when picking these type of stocks. Regarding concurrent please go through my last post on concurrent there is every thing for you.

with thanks
be and make

zen said...

dear be and make sir, if possible can you please let us know
1.what is the target you are expecting in this counter?
2.and when are you expecting the target to get achieved?

Be and Make said...

Dear Zen - Dont give too much importance to this stock. I already told to hold not more than 5% in one's bag. So, i am not giving any target for this stock but i am saying it to hold for couple of years.

I am working on another two stocks very soon i will update here.

with thanks
be and make

zen said...

thank you kalyan sir
waiting for your multibagger reco
may god bless
regards

PENNY STOCK INVESTMENTS said...

Excellent biotech stocks.

VALUE STOCKS BELOW 5 DOLLARS said...

Nice blog

epic research said...

Very helpful information is posted about the company which can be very useful to traders. Your analysis is brilliant please include some Stock tips in your next post.