Ganesha Ecosphere, A possible re-rating candidate - For risk takers only !!

Happy new year to all our readers. We wish 2015 to bring greater wealth than 2014 !

It has been a while now, we have not added any new stock to the portfolio. Instead chose to enjoy the gains in our earlier investments + patiently waiting for the recent ones to deliver.

It seems the best time for buying stocks is now. The new government is opening up for new business in many sectors which in turn can be beneficial for many sub-sectors. There are opportunities,   But the difficult job is to decide, what to buy !! 

After going through many businesses for sometime , one company did catch our eyes.The ultimate business is one that generates wealth from waste. I am sure all will agree with this. Yes, The vision of Ganesha Ecosphere and its promoters is what we are excited about. 

However the fundamentals of the company have not convinced us. We leave the decision to you. 

Company profile

The Company is engaged in the manufacturing of recycled polyester staple fiber from PET waste and is one of the largest in the space. The Company is also a manufacturer of polyester yarns. 

Products

Self explaining picture

P/E

Ganesha was trading at a very low P/E of 6 and now has improved. Industry average is around 12-15. However weak fundamentals may be the cause for such a low P/E. Going forward with the improved business environment it should get better.

Coco-cola collaboration

Hindustan Coca-Cola Beverages in collaboration with Ganesha Ecosphere Ltd. (GESL), the largest PET recycler in India, established the nation’s first bottles-to-fiber recycling operation.

The recycler converts PET scrap to fiber to produce shirts and other recycled polyester products. Collected PET bottles are baled, washed, extruded, 

and converted into regenerated staple fiber which textile mills use as stock for polyester materials.

If you're in India, the shirt you’re wearing may have previously been a bottle.

Future potential

Major hotel chains in New Delhi are starting to join this sustainable movement and several large companies have indicated interest in recycling consumed PET packs.

The applications are wide and proper execution can lead to tremendous wealth creation.

Consistent dividends

For a growth oriented company, giving consistent dividends in the last 5 years is appreciable.

The negative side

Business Model is heavily driven by capex,with almost all of its growth coming from capex.

Company runs a debt to equity ratio of 1.5x+ and promoters have pledged almost three-fourth of their holdings.

Business has benefited significantly from subsidized taxes of 10-11%. However, that is unlikely to stay beyond 2016-17. This will result in net margin compression.

Conclusion

The fundamentals of the company as such is not at all exciting in any ways. There are many such companies with the same fundamental grades. Having said that the company is growth rates are attractive.The re rating factor here is the concept of the business. How cool is it to wear a shirt made of a PET bottle. The future of the stock depends on how good this concept is marketed. There is an increase in spending within the corporate's with respect to environment. 

We hope things go good! 

We have only tried to bring the company to your notice. The post might not contain all the details.

Take decision after going through things personally as it may not suit every class of investor.

Ganesha is listed in BSE and trading around ~140.

Regards,
MR