Chembond is the leading manufacturer and supplier of Specialty Chemicals to diverse sectors of industry such as automobile, steel mills, fertilizers, refineries and petrochemicals, power plants and infrastructure projects such as metro systems, bridges and expressways.
Chembond has identified Water as the major area of thrust and has taken steps with the formation of JV - H2O Innovation India Ltd to offer 'State of Art Technology' that provides complete solution to water problems - from RW treatment to waste water recycling.
Some Companies are always like tortoise, hiding the most exiting part of their business under a shell called either subsidiaries or joint ventures till a critical size is achieved. When such business grows these subsidiaries will eventually merged with the main company or de-merged to unlock the valuation. Till such a merger/de-merger happens, the main company will known for its boring business and enjoying low valuation. But on merger/de-merger the entire picture rapidly changes and catch the market fancy in a short period . Meanwhile, utilizing the low valuation as an opportunity ,promoters may mop up the entire floating stock from market .CHEMBOND CHEMICALS is such a play which is unnoticed by most of the market participants ,even if its main business is growing decently.Even if this company have six divisions including its subsidiaries and joint ventures ,it is known as a Construction Chemical manufacturer.
Under this fold company is making construction chemicals, water proofing compounds, concrete repair products..etc.Major clients of this division includes RDC Concrete Ltd, J K Laxmi RMC ,Birla Readymix , Larsen & Tubro Ltd., Oriental Structural Enginerring Quark City India Pvt. Ltd., Sunway Constructions Ltd. , Unitech Ltd. ACC RMC , Hindustan Construction company, Nagarjuna Construction Company , Gammon India DLF Laing O" Rourke India Ltd..etc. Chembond have a nationwide distributor network and known as a quality producer in this category. Another division of the company is Coatings division which is making corrosion protection coatings for structural s and industrial floor coatings materials. Under the trading division company offering various types of construction chemicals and representing ‘Peramin AB’ of Sweden ,a leader in this industry- in India. Chembond’s biotech division is through an associate company –Chembond Enzyme Company Ltd- supplying products which are widely used in industries like Textile,Distillary and Animal feed. Company also having a joint venture with chemical major Henkal for manufacturing metal treatment chemicals known as Henkal Chembond Surface Technologies Ltd.
The promising part of Chembond is its increasing presence in the Water,Waste water and Effluent treatment business. Chembond Ashland Water Technologies is a company jointly promoted with Chembond Chemicals (55 %) and Ashland Inc of USA .This company is manufacturing various type of water treatment chemicals for cooling water treatment,boiler feed water treatment,waste water treatment..etc and finds applications in industries like Chemicals,Power generation.
In the beginning of 2010, Company started a 51 % joint venture (H2O innovations India Ltd) with H2O Innovations Inc of Canada for equipment based solutions for Water treatment ,recycle and re-use. This industry having tremendous potential in India and the overwhelming response to other companies like VA tech Wabag is a true indicator of the fact. Within a short span of time this new company already received prestigious orders.
The company commands almost a monopoly in it's business and with it's small concentrated equity capital there is a possibility for the stock to command a 10x valuations even from the current levels.
Company is performing very well in financial front and rewarding share holders accordingly. For the financial year ended March 2015 ,Chembond posted a turnover of Rs.216.75Cr and a net profit of Rs.5.78 Cr.- Company has been maintaining a healthy dividend payout of 43.45%
Well,to end it all, at current levels I feel it's a definite buy given the value that's yet to be unlocked.
Disclosure: Looking to start adding positions on Monday and further as the story progresses