A Recent investment idea recommended by HDFC Security. The company is in business of Specialty chemicals. As against current market capitalisation of Rs 75 Cr (approximate), the company has Cash equivalent of Rs 36 Crore (approximately Rs 48 per share). The company holds 57000 shares of Clariant Chemicals with Current market value Rs 5.4 Cr (Purchase cost Rs 13.6 Lakhs already included in Cash and Cash investment).
The Indian Specialty Chemical Industry has the potential to quadruple in size from US$ 20 billion to US$ 80 billion over the decade.
Among Specialty Chemicals, the focus of the company has expanded to performance products that are used in larger volumes in the Oil Field and Construction Chemical Sectors, to maintain the integrity of its pipe lines.
The company has a 50:50 JV with global leader Nalco Champions, whose operations are taking off and sales and PAT have grown smartly in FY14.
Its expansion has been delayed due to clearances but it has not hampered production; it has now embarked on debottlenecking.
It is available at cheap valuation considering itâs robust and growing earnings, the cash / current investments on books, inflow from sale of stake in Inogent Labs in July 2014 (Rs.8.97cr) and value of shares held in Clariant Chem on its books.
Foreign currency risks and risks of volatility in raw material prices
Slowdown in industry Dai-Ichi is catering to and Competition, domestic/overseas
At the current market price (of Rs 100), the company is trading at 7.2x its FY14 Adjusted EPS of Rs 13.9 per share.With very good debt equity ratio, conservative management (Mainly Parsi with someindependentdirectors are associated with Godrej Group and Tata AMC). Thegrowth of JV would also be key trigger to the growth in the company which otherwise shown lackluster RONW ratio of around 5-8%.
Views from other members are invited.