Stock watch: Gujarat Alkalies

Gujarat Alkalies & Chemicals Ltd (GACL) is a good stock to watch out for the long term. The scrip closed at Rs 148 on Monday's trade. The counter has witnessed increased activity in recent weeks and registered a 52-week high of Rs 158 on August 23.

However, the scrip has declined about 3 per cent in past one week, while average daily volumes at the counter are about 2.9 lakhs.

The company has a market capital of about Rs 11 billion. About 25.58 per cent of the company's 7.34 crore shares are held by public and 22.91 per cent by institutions. The promoters have a holding of about 36.72 per cent of the total equity.

The company, which has been maintaining its leadership in the caustic soda industry, has a 16.2 per cent market share. The company, which has a total capacity of 270,000, derives 65 per cent of its revenue from caustic soda.

According to analysts, the chlor alkali industry is expected to grow at a CAGR of 5.5 per cent compared with 4 per cent growth in the previous years. GACL is under going massive expansion plans to capture the growth in the industry.

The company is raising caustic soda capacity by 66000 per annum at a cost of Rs 108 crore. It is also planning to produce poly aluminium chloride and hydrogen peroxide.

GACL posted a 128 per cent rise in FY05 net profit to Rs 1443 crore. Looking at the earnings growth, the stock, which is currently trading at a trailing 12-month P/E of 5x, looks undervalued, say analysts.