GSFC Spreads decline; downgrade to Accumulate ::Emkay

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GSFC

Spreads decline; downgrade to Accumulate

ACCUMULATE

CMP: Rs443                                        Target Price: Rs530

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n     Caprolactam prices declined by 26% from their all time high of $3580/mt in Sep-2011 to $2650/mt in the last week of November

n     Driven by decline in caprolactam prices, caprolactam-benzene spreads also declined to $1700/mt at the end of Nov-11 compared to $2465/mt during September

n     Sharp fall in spreads is likely to lead to deceleration in earnings for GSFC and growth is likely to remain suppressed in near future

n     We maintain FY12/FY13 est at Rs 84.6 / 78.4 since we have not built in aggressive spreads. However, downgrade the stock to Accumulate from BUY on recent run-up in stock