Saturday, April 24, 2010

Clariant Chemicals - target 800- Dividend yield same as Fixed Deposit

Well since initial post on Clariant Chemicals in March 2009 when it was at 170, when it was trading at an unbelievable 11% dividend yield ( Sensex was at 8,000), it has been remarkable to see market finally getting more efficient and finally giving Clariant Chemicals some of its due.
Clariant Chemicals - cmp 568. Target 800-850 in one year. ( 40- 50% upside)
In past one year its up 3.6x .52wk Range:171.20 - 609.00 (Lifetime high)


Q1 March 2010 ending Results
  • EBIDTA up 26% to 43 crores. PAT up 27% to 33 crores ( though it includes some extra-ordrinary items such as sale of some businesses).
  • Sales up 17%  to 229 crores.
  • Net margins - also great. NPM % at 14%. It has Consistently maintained above 10%.
At cmp of 568 ,Clariant is trading at Market cap of 1510 crores or at Q1 Annualized PE of 11x.  and PSR of 1.6x thus offering at least `risk-free` +30-50% upside giving at target of ~ 1,000 in one year (implying PE of 16x and PSR of 2.4). Still very much under-owned stock with just UTI holding 2% as on March 2010.
Great Financial Ratios - Last FY ( CY 2009) Annual sales of 942 crs and PAT of 108 crs. So all set to cross 1,000 crore revenue this year.Great ratios of RONW / ROCE above 30% and CFO of 170 crores.Maintained Dividend payout ratio of above 65% ( at 72% of Net Profits)
Dividend dates -In mid-July 2010, expect Clariant to maintain Rs 10 per share interim dividend  followed by another end of the year dividend of 15-20 or total dividend of 30 ( expect a growth of 20% from previous year dividend of Rs. 25 per share, that was in turn a 32% increase in dividend from last years dividend of Rs 19 per share with dividend payout ratio of 72%).
Even after 3.6x rise still trading at dividend yield of 5.3%.(2010 expected dividend). Debt free status..Great stock to buy and hold for keeps. Stock giving post tax dividend yield of almost equal of Fixed Deposit post tax return. (Current 1 year Gross Pre tax Fixed Deposit Interest rates are 6 % to 6.75% giving post tax rate of 5%). Also in case one buys Clariant at lower levels of 500 , post tax yield becomes 6.0%.
Disclosure - Long Clariant. Planning to buy more.

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