DE Nora India
A novel bet
The company is set to report sharp growth in CY 2008 and is yet available at a P/E of 7.3 and possible dividend yield of 7%
| Buy | DE Nora India |
| BSE Code | 590031 |
| NSE Code | DENORA |
| Bloomberg | DENI@IN |
| Reuter | TTNC.BO |
| 52-week High/Low | Rs 174 / Rs 74 |
| Current Price | Rs 101 (as on 2nd April 2008) |
DE Nora India (DNIL, formerly Titanor Components) is engaged in the manufacture and coating of anode and cathode for electrolytic process for application in the chlor-alkali & chlorate plants, cathodic protection systems, Electrochlorinators and manufacture and marketing of EMEWO Electrowinning Cells Equipments. All these applications come under the field of Electrolytic Processes.
Gruppo De Nora of Italy holds 51.3% stake in the company.
Market leader in a specialised business
DNIL was set up with technical and financial collaboration of ‘Gruppo De Nora’ of Italy, a world market leader in this segment. The company's core business lies in Chlor-alkali sector, which is highly cyclic in nature. So, the company expanded its market into high tech products such as cathodic protection systems, Electrochlorination systems and lately into Electrowinning Cells Equipments. In India, DNIL is a market leader in all these products.
Recoating of anode and cathode is a specialised process, formulation of which involves use of noble metals. These formulations and processes are Proprietary and because of its affiliation to ‘Gruppo De Nora’, the company has the authority to use these formulations and processes, giving it the prominent market share in India. TCL not only provides support to all De Nora and Krupp Uhde customers in India but is also equipped to give technical support to other technology suppliers in the chlor-alkali sector.
The company has technical collaboration with M/s.Oronzio De Nora International B.V., The Netherlands for Ion Exchange Membrane Electrolysers for Chlor-Alkali Industry, Water Electrolysers and Electrochlorinators for Water Treatment and with M/s.Oronzio De Nora S.A., Switzerland for Cathodic Protection (Anti corrosion) Systems and with Electrometals Technologies Limited, Australia for EMEWO Electrowinning Cells.
Strong parent
The De Nora Group of Italy was established in 1923 and it rapidly expanded as a world-wide leader in the design, manufacture, erection and commissioning of electrochemical plants.
Since 1923, the Group has expanded its manufacturing and sales activities globally and is presently in Italy, India, Japan, Singapore, France, Switzerland, Brazil, Germany and China.
The Oronzio De Nora group is present in the Chlor-alkali sector, in this country, since late fifties, when the first plant for the production of caustic soda and chlorine via amalgam process, was installed.
Bad CY 2007
In CY 2007 (ended December 2007) the company registered a 7% fall in its revenues to Rs 20.57 crore. OPM fell from 34.3% to 28.9%. PAT was down 17% to Rs 4.19 crore.
The main activity of the company is dependent on recoating of electrodes for membrane cell electrolysers in chlor-alkali plant, which is cyclic in nature and was the main cause for reduced turnover during FY 2007.
Execution of just one order could see the company almost doubling its revenues in CY 2008
The company has received one order of Rs 40 crore for fabrication of Chlorate Cells for West Coast Paper Mills from UDHE India. This order is to be executed in the Year 2008 itself. The company’s net revenues were Rs 20.57 crore in FY 2008. Thus this one order of Rs 40 crore could see the company doubling its turnover in FY 2008. Other orders would provide further impetus.
The company has also been able to achieve a breakthrough in the field of Surface Finishing by obtaining its first order for supply of Platinized Titanium Anodes. The management of the company is hopeful that successful execution of these projects would help it in procuring further orders in future.
The Membrane Cell Plants are due for their recoating cycles and the company is looking forward for better future prospects for its membrane recoating activities.
DNIL foresees good business potential in the field of Electrowinning Cells Equipments and for its pre-engineered package for Jewelry industry application BRAVORTM.
Attractive dividend yield
The company maintains high dividend payout ratio of above 70% due to lack of capex requirements.
If the company maintains CY 2007 dividend of 5.8, dividend yield on current ,market price works out to 5.7. We expect dividend rate of around 70% for CY 2008, which gives dividend yield of 6.9% at current price of Rs 101.
Attractive valuation
For year ending December 2008, we expect the company to register sales and net profit of Rs 36 crore and Rs 7.70 crore respectively. On equity of Rs 5.56 crore and face value of Rs 10 per share, EPS works out to Rs 13.8. The share price trades at Rs 101. P/E works out to just 7.3.
| | 0412 (12) | 0512 (12) | 0612 (12) | 0712 (12) | 0812 (12P) |
| Net sales | 22.85 | 31.00 | 22.54 | 20.57 | 36.00 |
| OPM (%) | 47.5 | 32.9 | 34.3 | 28.9 | 31.0 |
| OP | 10.85 | 10.21 | 7.74 | 5.94 | 11.17 |
| Other Inc. | 1.25 | 1.53 | 1.03 | 1.11 | 1.22 |
| PBIDT | 12.10 | 11.74 | 8.77 | 7.05 | 12.40 |
| Interest | 0.01 | 0.00 | 0.10 | 0.02 | 0.01 |
| PBDT | 12.09 | 11.74 | 8.67 | 7.03 | 12.39 |
| Dep. | 0.78 | 0.81 | 0.83 | 1.06 | 0.90 |
| PBT | 11.31 | 10.93 | 7.84 | 5.97 | 11.49 |
| Tax | 4.38 | 3.26 | 2.79 | 1.78 | 3.79 |
| PAT | 6.93 | 7.67 | 5.05 | 4.19 | 7.70 |
| EPS* (Rs) | 12.5 | 13.8 | 9.1 | 7.5 | 13.8 |
| *Annualised on current equity of Rs 5.56 crore; | |||||
| DE Nora India: Results |
| | 0712 (3) | 0612 (3) | Var. (%) | 0712 (12) | 0612 (12) | Var. (%) |
| Net sales | 4.86 | 5.04 | -4 | 20.57 | 22.54 | -9 |
| OPM (%) | 19.8 | 31.0 | | 28.9 | 34.3 | |
| OP | 0.96 | 1.56 | -38 | 5.94 | 7.74 | -23 |
| Other inc. | 0.33 | 0.02 | 1550 | 1.11 | 1.03 | 8 |
| PBIDT | 1.29 | 1.58 | -18 | 7.05 | 8.77 | -20 |
| Interest | 0.00 | 0.09 | -100 | 0.02 | 0.10 | -80 |
| PBDT | 1.29 | 1.49 | -13 | 7.03 | 8.67 | -19 |
| Dep. | 0.48 | 0.23 | 109 | 1.06 | 0.83 | 28 |
| PBT | 0.81 | 1.26 | -36 | 5.97 | 7.84 | -24 |
| Tax | 0.33 | 0.96 | -66 | 1.30 | 3.54 | -63 |
| Deferred Tax | 0.18 | -0.61 | -130 | 0.48 | -0.75 | -164 |
| PAT | 0.30 | 0.91 | -67 | 4.19 | 5.05 | -17 |
| EPS* (Rs) | 2.2 | 6.5 | | 7.5 | 9.1 | |
| *Annualised on current equity of Rs 5.56 crore; | ||||||
BigGains !!
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