Ashapura Minechem earlier recommended as a BUY @ Rs.42 which is currently trading @ Rs.38 . Company reported excellent numbers for the June quarter even excluding exceptional item .On a consolidated basis company reported a turnover of Rs.324 Cr ( last year same period Rs.150 Cr) and a net profit of Rs.49 Cr ( last year same period Rs.88 Lakhs) .(All figures excludig extraordinary items) What is more important is - this stunning performance is reported at a time when the mining and metal industry is going through the worst period in last 10 years.Reiterating BUY at current level with substantial upside potential in long term .Old posting on this stock is re-producing below.
Check latest result HERE
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This company along with its subsidiaries are the largest exporters of bentonite from India and one among the biggest five in the world.In addition to bentonite, company is in the production of many other minerals like Bauxite , Kaolin, Attapulgite, Barites..etc.Its major product –Benonite- is widely used in metal casting, iron ore pelletizing, civil engineering, drilling, paper, detergents, cosmetics..etc. Bauxite is the basic ore for producing Aluminium.Company was a darling of investors till 2008 and its share price (post FV split) was around Rs.400-500 level.A big blow came in the form of the ban on export /sale of bauxite by the government of Gujarat in 2008-09.Only because of this unexpected ban many issues followed in the form of forex losses and claims by few shipping companies.Kaolin plant in Kerala went into trouble on account of some local issues.All these incidents derailed company’s operations and ends in big losses.New mineral policy announced by Gujarat Government in 2009 -10 bring clarity in mining policy and permitted bauxite mining again.But by that time company’s financial health eroded a lot and it declared as a Sick company in 2012.After many month’s sincere attempt by the management, now the company is in a recovery mode.Debt of the company restructured and promoters brought more funds into the company by way of subscribing 40,00,000 Equity Shares of Rs. 2 each at a price of Rs. 36.83 per share and 40,00,000 Convertible Warrants to be converted into equity shares.Claims by shipping companies are challenged by the company in court and case with one company already settled out of court.Management of Ashapura expecting a favorable verdict in other cases too.On the financial front company showing sharp improvement in past few quarters.In latest full year company reported a Sales of Rs.771 Cr and its bottom line also showing remarkable improvement even excluding other income component.
Due to environment related issues ,entry of new players in this segment is not very easy now and probably in future.This situation giving special advantage for existing miners .I believe ,the testing time of this company is over and it is the time for a new beginning in the history of this company .
Link to company website HERE
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Disc: I have vested interest in Ashapura Minechem
Disc: I have vested interest in Ashapura Minechem
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