Does this stock still have room to grow after its 700% surge?

Chennai-based Anil Kumar Goel, a highly respected value investor, has made a significant investment in Ganesh Benzoplast, a small cap company engaged in liquid storage tanks and chemical production.

Goel, who was previously known to have invested heavily in sugar stocks, currently owns a 3% stake in Ganesh Benzoplast, a major stock market underperformer. But these are stocks that value investors like Goel only focus on for the long term.

At its board meeting on January 29, Ganesh Benzoplast approved INR32.4 billion in preference share issuance to non-promoter investor Goel. Two million shares were issued at par value of INR1 and premium of INR162/share. The stock price rose 5.5% on the day, while the benchmark Nifty 50 rose only 2%.

Shares of Ganesh Benzoplast have risen about 700% from their corona low of ₹23.35. The business has a market capitalization of ₹1,300 crore and has returned 15 per cent over the past year, lagging a lively bull market that has seen the small-cap index rise nearly 62 per cent.

Are there opportunities for Ganesh Benzoplast stock to perform better in the future? Well, let’s find out.

Ganesh Benzolast Company Overview

Ganesh Benzoplast, headquartered in Mumbai, India, is a prominent independent operator of liquid storage tank facilities specializing in the storage and management of a wide range of liquid chemicals and petroleum products. There are storage terminals at Jawaharlal Nehru Port Trust (Navi Mumbai), Cochin Port Trust (Cochin) and Mormugao Port Trust (Goa).

GBL also manufactures specialty chemicals, food preservatives and oil additives through its two facilities located at MIDC Tarapur in Maharashtra. Mr. Ramesh Pilani, Founder, Promoter and CFO of Ganesh Benzoplast, has over 40 years of expertise in the chemical production, trading and liquid storage industries.

Mr. Rishi Pilani, MD and CEO of GBL, is a second-generation entrepreneur with a degree in Chemical Engineering and previously worked at General Electric Company in the United States.

Ganesh Benzoplast has a long-standing relationship with key clients such as Cargill, BPCL, Jubilant Life Sciences, Reliance Industries and Akry Organics. The company has also recently joined renowned companies such as Aarti Industries, Pidilite Industries, Deepak Nitrite, Asian Paints, Gujarat Ambuja Imports, Deepak Fertilizers and Petrochemicals Corporation.

Ganesh Benzolast’s Business Segments

Ganesh Benzoplast operates through two segments: Liquid Logistics and Chemical Manufacturing. The Liquid Logistics division has tank farms in three major ports in India. This segment also includes Liquid Storage Tanks (LST), Rail Logistics and Engineering, Procurement and Construction (EPC).

Ganesh Benzoplast is engaged in manufacturing and exporting a wide range of Food Preservatives, Lubricant Additives and Specialty Chemicals under its Chemical Division.

Liquid Logistics by Ganesh Benzoplast

Liquid storage tank (LST)

Ganesh Benzoplast’s LST segment is the second largest revenue generating segment and a leading independent liquid storage tank (LST) provider, accounting for 49.7% of total revenue in FY23.

It specializes in the storage and processing of liquid chemicals and petroleum products and operates storage terminals at JNPT (Navi Mumbai), Cochin and Goa.

Rail logistics:

Within the LST division, Ganesh Benzoplast also manages rail logistics and provides transport services at ports through its subsidiary Company Infrastructure Logistic Systems Limited (formerly Stolt Rail Logistic Systems Limited), the material subsidiary of the company involved in rail logistics business. Storage center based at customer’s factory.

Engineering Procurement and Construction (EPC):

Within the LST division, Ganesh Benzoplast provides EPC services to its customers through its wholly-owned subsidiary GBL Infra Engg. Services Pvt Ltd (GBL IES).

Through EPC, the company provides superior solutions in technical advice, design and engineering, procurement, construction and project execution from ideation to commissioning for industrial and other service markets.

Chemical Division

The Chemical Division manufactures and exports a variety of products, including food preservatives, special chemical products, lubricant additives, gear oil additives, hydraulic oil additives, and grease additives. This segment was the most revenue-generating segment, accounting for 50.3% of total sales.

Ganesh Benzoplast is the only manufacturer of pure benzoic acid and its derivatives such as Sodium Benzoate, a well-known food preservative, and Benzoplast, a special plasticizer that outperforms conventional plasticizers.

The company has a 24,000 MTPA manufacturing facility at MIDC, Tarapur. Unit 1 produces petroleum additives, and Unit 2 produces special chemical products and food preservatives.

Treasurer of Ganesh Benzolast

In FY 2023, Ganesh Benzoplast saw an increase in revenue reaching ₹421 crore, up 18% compared to ₹357 crore in FY 2022. After analyzing four years from 2020 to 2023, Ganesh Benzoplast recorded a Compound Annual Growth Rate (CAGR) of 19.45%.

At the same time, there has been a notable increase in net profit, with a 66% increase from Rs 3.3 billion in FY 2022 to Rs 5.5 billion in FY 2023. Cumulative net profit recorded a CAGR of 17% over the four years from fiscal 2020 to fiscal 2023.

In FY23, Ganesh Benzoplast maintained favorable financial metrics with return on equity (ROE) of 15.43% and return on equity (ROCE) of 18.03%.

Future Prospects of Ganesh Benzolast

Next-generation growth engine: LPG terminal

GBP plans to establish an LPG terminal at JNPT. Management has secured the necessary legal approvals to develop LPG storage tanks at the JNPT facility. We plan to actively pursue this next year as well.

It owns land in JNPT and plans to build a 48,000 tonne LPG plant at a cost of ₹450-500 crore (payback period of 3-4 years). The plant is scheduled to begin operation in the third quarter of 2026.

Management’s goal is to increase margins by changing product mix and accelerating cargo evacuation. We aim to be competitive in the LPG industry by offering consumers better prices, faster processing times and full VLGC processing capabilities.

Realization of shareholder value

GBP is considering separating its two businesses (LST and Chemicals), which will be driven by clear leadership and allow each area to focus independently. This allows companies to plan and strategize across their various businesses while developing a game plan for long-term success.

However, the spin-off of Ganesh Benzoplast’s chemicals division has been temporarily delayed due to the ongoing court case with Morgan Securities. The matter is currently pending in the Delhi High Court and a decision is expected soon.

To clarify the operations and value of its primary business, GBP transferred its entire chemical business to a separate, wholly-owned subsidiary (GBL Chemical). This allows investors to assess the fundamental value of each business individually.

conclusion

Ganesh Benzoplast appears well-positioned for growth, with plans for an LPG terminal and a potential spin-off to create shareholder value. The company demonstrated strong financial performance with increased sales and profits. However, the success of future plans remains to be seen.

What do you think about the prospects of Ganesh Benzoplast? Do you think Ganesh Benzoplast can continue to outperform and deliver strong returns to investors like Anil Kumar Goel?

A work written by Nalin Surya S.

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