Buy Sarla Polyester for gains with Q3 results in view

Sarla Performance Fibers Limited (formerly known as Sarla Polyester Limited) is a 100 per cent EOU engaged in the manufacturing and export of polyester and nylon textured, twisted and dyed yarns, covered yarns, high tenacity yarns and sewing thread. The company exports to 40 countries. The company's emphasis is to focus on niche end-user applications in India, higher value-added yarns to leading global apparel brands and companies.

One of the positive factors in recent times is the increasing gap between cotton and polyester prices. Though there was a glut in cotton and prices had fallen due to oversupply and less off take from China, the synthetic fibre prices also fell following the slump in crude oil and its derivatives. The prospects of polyester/nylon yarns remain healthy due to increase in demand and due to decrease in the price of partially oriented yarn (POY) and chips. Buy at current levels of Rs 30 for short term target price of Rs 42 / 45 during the announcement of Q3 results and Rs 60 / 70 in next 9 to 12 months.

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Andhra Petrochemicals Limited (APL) is a joint venture promoted by APIDC and Andhra Sugars Limited (ASL). APL was established with a capacity to produce 30,000 MTPA of oxo alcohols in Visakhapatnam. The plant has undergone an optimisation and modernisation scheme to increase the capacity to 73,000 MTPA. The plant employs technology from JM Davy, London, U.K., with total capital investment of Rs 4,970 million. Estimated demand of oxo alcohols at 250,000 MTPA, with healthy growth rate of 8 per cent to 10 per cent per annum, in general, is a good opportunity for the company with existing capacity of 80,000 MTPA, considering the huge demand-supply gap in the country. Sales realisation has improved on account of anti-dumping duties imposed by India on imports from certain countries.

The company signed natural gas (NG) term sheet agreement with GAIL last year. The NG project is expected to be completed by Q3 of 2020-21 and NG is expected to be available from Q4 of 2020-21, which may substantially bring down cost of production. Results of Q3 are expected to be very good with sources indicating Rs 40 crores plus PAT, which is one of the highest in its history. Buy for target price of Rs75 / 80 during results time and Rs120 in medium-term.

Olectra Greentech Ltd is engaged in manufacturing polymer insulators and electric buses. OGL is the largest manufacturer and suppliers of composite insulators in India. After GOI has introduced Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME-II) policy in India which aims to boost electric mobility and increase the number of EVs in commercial fleet by providing subsidy/ incentives on electric vehicles; Olectra tied up with global major BYD and entered the electric bus segment aggressively. Olectra has already bagged orders for over 1,450 electric buses for various STUs across India.

Further, orders of over 3,000 buses are in pipeline. The presence of Olectra electric buses in India has crossed more than 1500 numbers, first for any OEM in India. The company has reportedly put plans in place to indigenise the buses, which will boost the profitability tremendously. With the delivery plans of orders in place for Q3 and Q4, the company is expected to post quantum jump in turnover for FY20-21 to close to Rs 600 crores. Punters are labelling the company "Indian Tesla". Buy for short term target of Rs250 and medium term target of Rs 400.

(The author is a stock market expert. He is former vice chairman of AP Planning Board)