Ineos ABS India (INEOS), an 83% subsidiary of Ineos Global Group, is Indias
leading manufacturer of an engineering plastic named acrylonitrile butadiene
styrene (ABS). On the back of capacity expansion and product development, the
top line of the company is expected to grow at a CAGR of 19% during
CY2010-12E. The business of the company is to be transferred to ‘Styrolution’, a
50/50 JV between BASF and INEOS and as specified in the company release on
BSE, ‘an indirect change in control of INEOS ABS India Limited is expected’, which
may trigger an ‘Open Offer’ in the next one year, in our view. The stock is
attractive at 12.7x PE and 0.9x EV/Sales for CY2012E. We recommend Buy on
INEOS ABS India with a target price of Rs702, based on a target P/E of 16x and
implied EV/Sales of 1.1x for CY2012E.

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