INEOS Styrolution stock may give good returns in 12 months

The Indian plastic market has grown by more than 2000% during the last 30 years while the plastic resin market has historically outperformed the GDP growth of the country. INEOS Styrolution India Ltd is part of the INEOS Group which is one of top tier chemical company in the world. INEOS is headquartered in Frankfurt, Germany, and is a global leader with unmatched background having 90 years’ experience in styrenics plastics. The company was founded combining the styrenics business of BASF and INEOS. INEOS has an annual revenue of around $61 billion having 194 facilities and 26000 employees around the world. INEOS Styrolution India Ltd is today a market leader in ABS Plastics and Polystrene. It is the No 1 producer of ABS and SAN serving a diversified range of applications such as automotive, electronics, construction, healthcare, packaging and other segments. ABS or Acrylonitrile butadience styrene is a plastic resin applied in the automotive exterior and interior, helmets, office equipment, electronic devices and many household applications. On the other hand, SAN or Styrene acrylonitrile plastic resin is applied in industrial goods, cosmetic jars, electrical and household applications, stationery, etc. Other major products are the INEOS Styrolution GPPS and HIPS which are suitable for injection moulding, food packaging to refrigerator components, healthcare and diagnostic labs, toys, plastic cups, containers and food packaging products. In April 2022 , INEOS Styrolution APC Pte Ltd (Promoter) holding a 75% equity stake in the Indian company proposed to dispose 14.40% of the total paid up equity capital of the Indian company with an option to additionally sell another 9.60% through an Offer for Sale (OFS). Pursuant to the OFS, the Promoters have only sold 13.81% equity on 19 April 2022. To prop up the economy post Covid, the Government has also brought in initiatives such as the Production Linked Incentive Scheme (PLI), Atmanirbhar Bharat and capex investment in infrastructure to boost the economic growth. Unfortunately, there are many headwinds at present such as the inflation risk, lingering Russia Ukraine war, elevated commodity prices and disruption in supply chain. But Indian economists expect the situation to improve in the near term and perform better than many other Asian and European countries. The INEOS management expects the economy to stabilise and strong recovery to take place for their products in FY 2023. Typically, ABS and plastics grow by 1.5 times the GDP and hence the INEOS management expect growth levels of over 10% for 2023 on the back of demand from electronics, household products and the two-wheeler segment. The company also expects decent margins for both the ABS and polystyrene segment. The company has announced an interim dividend of Rs 105 per share for which record date is 6 June. Analysts and brokers are recommending the INEOS Styrolution stock currently quoting at Rs 950 to their portfolio clients for a twelve month investment period.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.