Bhansali Engineering Polymers - An Import Substitution Story!

(yudiagg) #124

I have large investment in this stock. I have entered recently and quite
optimistic due to its current NIL debt and future long runway of demand.

(Akash Padhiyar) #125

Promoters are continuously buying from open market…
I think something good is cooking inside the company…company has acquired 3 4 highly paid(Package in crores) persons from nippon for new product development. If they get success BEPL will be in new orbit.
Does the promotors buying signifies something like that?

(lohiyaakshay08) #126

May I ask, from where have you got the information that they have hired 3-4 top paid professionals?

(phreak) #127

2 companies of the 2 players industry rarely show contradictory results.

Ineos’s ABS is basic and is a low margin product as was discussed earlier in this thread. BEPL customises their product by specification for its clients which is higher margin. They seem to have over a hundred grades and over a thousand colours which lead to its higher margins due to the value addition.

(nil_71) #128

It is mentioned in earlier thread

(Agarwala) #129

Another triangle breakout on the cards… Look at classical cup and handle pattern.

(Shivram) #130

FACT (like the infy board letter :-)):
a. In 2015-17 the capacity was expanded from 51 KTPA to 80 KTPA in 2 phases. The gross block increased by 38 crores in 2016 and 17 crores in 2017. The cost of the expansion (38+17)/(80-51) = 1.9 crores per KTPA. I will assume 2 crore per KTPA for future expansion considering inflation.

b. 2017 sales was 704 crores, PAT 35 crores, giving an EPS of 2.10. PAT Margin is 5%. Gross Margin is 22% (Material Costs - 550 crores).

c. Depreciation was at 5.4 crores (3% on gross block) and working capital is 10% on sales (70 crores on sales of 704 crores).

d. Capacity utilisation in 2016-17 was 64.31% or 51 KTPA. Revenue per KT is (704 / 51) = 13.80 crores.

Management Expectation:
a. To ramp up ABS capacity from 80 KTPA to 137 KTPA by Dec 2018 entirely out of internal accruals.

b. Demand expected to go up at 15% CAGR for a decade. 2016-17 demand is 275 KTPA, Ineos and Bhansali cater to 160 KTPA. This means on a 5 year period average additional demand will be 54 KTPA, not to mention the current demand met by imports of 115 KTPA.

c. To achieve 90% capacity utilisation beginning 17-18 to generate adequate surplus to internally fund future expansion projecs without need for additional funding. It hopes to achieve 72 KTPA utilisation by Mar 2018.

d. To establish a port based greenfield project of 200 KTPA capacity by 2022. This will be through a JV with Nippon A&L Japan.

My Analysis
a. The capacity addition from 80 to 137 KTPA requires 114 crores of fixed capital 2 * (137 - 80) and 80 crores of working capital. Working for 80 crores is [ { (72 - 51) + (137 - 80) * 64.31% } * 13.80 ] * 10%. I am assuming the 80 KTPA works at 90% capacity and the remaining 57 KTPA works at 64.31% capacity.
The incremental profits after tax that will get generated in FY 18 is ( [72 - 51] * 13.80 * 22% * 70%) = 44 crores. In FY 19, it will be 44 + (137 - 80) * 64.31% * 5% = 70 crores.

Against the capital requirement of 114 + 80 = 194 crores, the company will be able to generate (40+44) + (40+70) = 194 crores. Phew! The management will have just about enough funds to fund the growth using accruals. This is assuming their expectation fructifies. They do have to make sure that they keep a close watch on their working capital.

b. Now the 200 KTPA capacity addition will need much more than 700 crores (Fixed + Working Capital) in my opinion. With a run rate of 110 crores cash generation post FY 19, the company will need atleast 400-500 crores to be able to build this additional capacity. Will Nippon Japan fund this?

c. In the short term, there are quite positive indications that the EPS can grow to 6 (105/16.7) odd by end of the FY 2019. The long term story is just playing itself out and we have to wait and watch.

(lohiyaakshay08) #131

What is the 22%?

Gross margin is 78%?

(Shivram) #132

Corrected. Gross Margin is 22%. Material Cost is 78%.

(Ram Arvin) #133

Hi Shivram, I was going through the latest updates in BSE for Bhansali and they have mentioned the capacity addition from 80 KTPA to 137 KTPA requires 300 crores.

Calculations will significantly change

(Agarwala) #134

ICICI Direct weekly call on BEPL… predicts 92 and higher by the end of the week. Read the call here.

(Agarwala) #135

A rising channel
For several months the prices are moving in a rising channel. During August they have again taken support at the lower support line and moved up smartly. The big question is: whether they will move all the way to the upper resistance band? If that happens, the current upmove should take BEPL at least to 110-120 levels before correction brings the prices down. Longer it takes to reach the resistance level, more will be the chances that the prices will sustain at the higher levels. I will feel more comfort, if BPEL remains in 85-99 range during next 10 days.

Disclosure - heavy investment done at 25 level.

(Agarwala) #136

According to a news today, seven shareholders, having about 2.5% holding, have been shifted from promoters to public category. Will some experienced member explain the significance of this move for small shareholders and the company?

(ASP) #137

Well if the news is that promotor holding is moved to public , then it suggests that the stock accumulated by promotor at lower level is now ready for disposal.

(nil_71) #138

This news has been given in NSE in 23rd August. This is just 2.63% . Names of Father, Son duo are not there. We need to make comments after verifying all the data. Yes Names of People, ending with Patel is there.

(s) #139

Seems across the board phenomenon in many listed companies. More likely seems like compliance to some new SEBI guidelines or possibly for tax purpose. Since it is across the board in so many listed companies i would ignore such changes impacting business

(cigarshop) #140

Its simple .Please don’t think too much.
Any family member or any ane close connected who are not involved in day to day business of the company and have no say would prefer to be in Non promoter category enjoying the benefits of non disclosure on buy and sell.

(madhavikkutti) #141

Following article gives a good hint about why it must have happened for BEPL:

It mentions: “In the last few months, many promoters who were not involved in the day-to-day control of the affairs or decision making of the company directly or indirectly or not holding any special rights, have chosen to reclassify as public shareholders to mainly to be eligible for exemption from the various obligations.”

(Parthasarathi) #142

Hi Madhavi, all the expectations of the movement similar to first quarter seems to not be happening. Do you see any threat because of this news? May be the promoters are silently selling after being classified as public and no one really knows as they are no more promoters. It would have been good if the current promoters at least have purchased the equivalent amount of shares that they classified as public. Neither seems to be happening. Where do you see BEPL going forward? Please let us know your thoughts.

(madhavikkutti) #143

Dear @Parthasarathi, Just going by this news, I am not able to conclude that, there is any threat. I can base my judgement only on information available on public media. Unfortunately, I do not see any other fresh news on Bhansali for the past few weeks, other than the above one. In fact, I do not find any weakness on the stock, as it has still risen by 10% in the past two weeks. I assume that, all the fundamentals and expansion stories also remain intact, as we have not seen any fresh news mentioning that, those have changed. True that, we have not seen the euphoria that we saw during the last quarter. I feel that, promoter cannot keep on buying the stock, as he also needs money to buy. I feel that (purely my assumption), some of the money that should have come onto this stock must have got redirected to other similar stocks (though their end products are different) like Himadri, Phillips Carbon, Graphite India, HEG etc. during this quarter.