This stock is the second-largest soda ash producer in India

The stock is trading at less than half the P/E multiple of Tata chemicals

On January 12, the market closed in the red. The S&P BSE Sensex closed trading at 59958.03, 0.25 per cent down, while NIFTY50 closed 0.21 per cent down at 17858. Regarding Sectoral performance, Industrials and Capital Goods outperformed, while Oil& Gas and Telecom were the Top Losers on the day. Among stock-specific action, GHCL Ltd was among the Top Gainers in BSE group ‘A’.   

The shares of GHCL Ltd closed trading at Rs 540.7, 4.2 per cent higher on the day. The stock opened at Rs 522.9 and made an intraday high and low of Rs 543.5 and Rs 522.15, respectively.   

GHCL is the second-largest producer of soda ash and among the leading sodium bicarbonate (baking soda) producers in the country. It has one soda ash manufacturing plant at Sutrapada in Gujarat with an installed production capacity of 11 lakh MTPA. It has a 25 per cent market share in the domestic soda ash market. It is also involved in the spinning business with the current 2 lakh installed spindle capacity.   

The company operates under 2 segments- Inorganic chemicals and spinning business. The soda ash and sodium bicarbonate business come under the inorganic chemicals segment. As per Q1 FY23, 79 per cent of the revenue was contributed by the inorganic chemical segment and the rest 21 per cent by the spinning segment.   

Capex   

• 5 Lakh MTPA soda ash capacity addition in the next three years where total investment is expected to be around Rs 3500 crore.   
• Doubling capacity for sodium bicarbonate from 60K MTPA to 120k MTPA by Q3FY23.   
• 40,000 spindle capacity addition expected to be completed in Q2FY23. More 40,000 spindle addition is planned to be completed by FY24.   
• The company will be funding the majority of its CAPEX plans through internal accruals.   

Triggers  

• New investments in solar energy and lithium battery are significantly contributing to the demand for soda ash.   
• Supply and demand dynamics for the soda ash market are favourable where there is no additional capacity available in the market for the next 2 years and the demand remains secular.