AksharChem (India)

(barasia) #61

After all their capex gets commissioned, the revenue will double to 500 cr given 80-85% capacity utilization. Management is hoping for a 15-20% EBITDA margin going forward. That is 100 cr EBITDA on the higher end. Assuming no other income, no debt, 100 cr of depreciation at the least and 33% tax, that gives a PAT of 60 cr. Current market cap is 531 cr. For a chemical company, that does not give me any MOS especially when I have considered best case scenario for all parameters.


Additionally as i got the comment out from the management in concall that this capex will also stabilize the ebita margin and upwards of 25pc margin on ppt silica will be a traction to it furtherā€¦
A 30 to 40cr of debt against a 80cr of expected ebita is totally managableā€¦
As per capex coming online, hacid is the only segment where the supply may increase from holistic considerationā€¦a 50cr of topine exansion is only going to be of advantageā€¦

Pigment green and silica and added violet 23, is an edge not treatened by supply hikeā€¦

Its better to watch the stock for another year or soā€¦

Disclaimerā€¦ Not invested, watching and interested to mk entry


My Q3 concall notesā€¦
1.15days production loss of this quater due to cpc green shut down for capex integration is 3.5cr of revenueā€¦ that is 0.5rs eps ā€¦

2.the other income has a major portion from treasury management, mainly due to investment of qip money in mutual fundsā€¦ So gradually other income will not be so muchā€¦additionally they undertook violet 23 greenfield expansion from internal accruals, so previously 9m otherincome that was clocked at 2.32cr in fy2017 will also not be that much with exhaustion of accrual investmentsā€¦ So double negative thereā€¦

3.the management guides the ebitda margins at be at 15-20% depending on rupee level and raw material costā€¦

4.Capexā€¦ revenue expected areā€¦
50cr from hacid [to start from q1 fy19]
100cr from green field expansion of cpc green [to start from fy20 q1]
100cr from ppt silica greenfield expansion [to start from q1fy20]

This 250cr of revenue will be generated at 80-85% capacity utilization[same as present utilization]
Cpc blue expansion is a backward integration for cpc green, so will not aid revenue but may aid miniscule margins in cpc green
Violet 23 expansion is going to start operating from q1fy19, the expected revenue was not projected, will depend on the marketā€¦But the customers are same as cpc green and same distribution channels will be used for marketingā€¦[this expansion was funded by internal accruals]

Venyl sulphone [company is 80percent producer in india which is mainly exported] has a volatile margin which is exposed to caustic soda, aniline oil and ethyl oxide as raw materialsā€¦all of these raw materials are procured from india, for example ethyl oxide from relianceā€¦the chemical disruption in china has lead to a major price hike [rm costs increased 20-30% yoy] even in indiaā€¦

In q3, 38cr of topline was from venyl sulphone and 17cr topline from cpc green [roughly]

The cpc green brownfield expansion is going to add 15cr of topline extra per year at current capacity utilizationā€¦So a total of 115cr of topline is going to be added after the total cpc green expansion is carried outā€¦

The typically maintain, 68% of rvenue from venyl sulphon and 32percent of cpc greenā€¦
After expansion the venyl sulphon revenue pie is going to get diluted down to 33%ā€¦
Also ebita margins are more stable for cpcgreen +violet23+silica+hacid as compared to venyl sulphonā€¦
So i asked the management ans they confirmed my theory that with expansion ebita margins are going to be more stable going forwardā€¦
Also silica has a ebit margins of 25%+ , so the ebita margins will improve evenā€¦

3.Debtā€¦ 30-40cr of long term debt is going to be added to fund the last leg of the capex and is expected in early 2020fyā€¦
They are considering both foreign currency loans and indian loansā€¦
Although foreign currency loan has the advantage of lower interest and rupee if remains strong can offset the revenue loss due to forex to some extent to the interest paid on foreign currency loansā€¦ But the company is neutral now, and will decide later depending on situationā€¦

4.The company expects to manage 80-85% capacity utilization in the next 2 years, when i pressed why 90plus capacity utilization cannot be expected as they mention in their ppt that exports are expected to grow at 15pc cagr , so they have to maintain higher than 90percent cap utilization to maintain the dominance in exports they do now at that growth rate, but the management was ready only to comment on visible picture which was 80-85% in next 2 fys, but they did hint we may have to utilize 90percent plus going further forward but was not confident about itā€¦

5.Since a lot of capex in this industry is coming up the management was asked on the outlook that if supply comes up will it not make the prices unsustainableā€¦To which the management is of the view the pigment business had no effect on the Chinese disprution, but overall they do not expect much disruption of current prices of other dye intermediates, we have to wait and seeā€¦

6.The company guides to maintain tax rates at 25-30% going forward which is 15% this quarterā€¦(the management was not confident of this statement though and didnot guide what the tax benefits out of capex can be)

7.company will maintain spending on effluent treatment and will continue to be a pollution free production line

8.Raw material prices are expected to soften from q1fy19
So the major positive is capex and margin stabilization and increase as a secondary effect, only 20percent of capex fund will be from debt, pollution free focus is going to continue, rm prices may come down soon further aiding marginsā€¦

Negatives are tax rate can be higher, 200cr of capex will come after fy19, other income will not be much going forward, increase in capacity utilization not forecastedā€¦

Disclaimerā€¦ Not invested, very much interested, watching to bottom fishā€¦


Very little data is there to do a technical analysis in long term chartsā€¦

The structure is going weaker week by week and a bearish engulfing pattern of the previous week has been a major damage in that the 2/1 angle line of gann fan has very high possibility of being broken, which is the critical line above while the bears are strongā€¦

The daily charts shows the price action has broken the ichimoku cloud and is well below the cloud , so any breakout is unlikely in the shorter termā€¦

Also the present down trend line is being followed, and only once the channel was broken out, but didnt sustainā€¦(daily chart)

Following are the reference screen shotsā€¦
1.Channel is being following on the downtrend in weekly chartā€¦

  1. The gann fan on weekly chartā€¦

3.Ichimoku cloud in daily chart on 14th feb (not a good Vday for akshar)

4.The present channel on the down trend on daily chart

Disclaimerā€¦ This is just a analysis on present trend of price action whcih is no way a price target recommendation or any intention has been expressed regarding price targets, enter or exit of positionā€¦Only for demonstration purpose
Not invested

(Mridul) #65

Mate, what is the competition intensity of products (silica, pigments) other than dye intermediates? They are guiding 80% capacity utilisation for capex, so ready mkt for these products?

I agree with there comments on dye intermediate capex and industry scenario. Situation in China hasnā€™t improved much, rather they have become less competitive due to adhering to pollution norms, rising labor costs, and rising electric costs. Dye intermediates are toxic materials and capex permissions are hard to get. I also concur with margin guidance in this vertical around 15-17% depending upon inr, rm and realizations.

Good part is that silica and pigments would be margin accretive, so overall margins would improve to 20%. At 500 cr revenue with 20% ebitda, with 3-4 cr interest cost and 8 cr (approx) depreciation, with negligible other income, even at 30% tax, this will give around 65-70 cr pat.

(shenbal) #66

Price has been hammered down to 588 levels and slowly recovering from there. The technical view continues to be bearish.

Looking at the Balance sheet number, TTM sales has reduced but Operating profit has reduced more than proportionately. There is a major margin shrinkage observed in the TTM period.

A look at the operating margin since 2011 (screener data) it has fluctuated between 6% in 2013 to 30% 2017. While 2015, 2016 and ttm show opm around 15% +/- ā€¦ Is this because of fluctuating raw materials cost or lack of pricing power in sales or both ?

Attaching the screener.in excel enhanced with some graphs of my own. The raw data tabs are also available.
Disclosure: Invested (less than 0.5%) and wondering if this is a right time to average (stock purchased at 800+ levels) or to exit and book loss. Exposure is small but was keen to participate in this space ā€¦

AksharChem (I) (1).xlsx (1.8 MB)

(sjsandesh) #67

Results for FT 2017-18:

(sjsandesh) #68

Investor Presentation:

(Munish mehan) #69

Hello, I am looking for some advise on this business. The prices seem very attractive with low P/e ratio. Vinyl sulphone prices have reduced and indian companies are getting benefits due to china making so many changes - would there still be good growth in the business. Thanks!