ValuePickr Forum

Ion Exchange (India) Limited

Hi Members

I am noviceinvestorjust starting to focus on value investing.

During my research, I have come across company called “Ion Exchange”.

They are mainly into Industrial Water Purification Business.

Fundamentals seems to justify that company health is good.

Below are Pros and Cons

Pros:

)- Stock is trading at 0.62 times its book value

)- Company has good consistent profit growth of 20.96% over 5 years

)- Promoter’s stake has increased

Pros:

)- Stock is trading at 0.62 times its book value

)- Company has good consistent profit growth of 20.96% over 5 years

)- Promoter’s stake has increased

Cash Flow seems to be problem. They haven’t been able to generate enough cas from operations.

Reserves 160+ still company is paying 25% of its earnings as interest rather than decreasing loans.

I can see the Net Profit is increasing about 22%-25% from March 2010 - March -2013.

Mar 2010 -->6.61 Cr

Mar 2011–> 12.31cr

Mar 2012–> 17.21Cr

Mar 2013–> 21.49Cr

Trailing 12 Months—> 19.76Cr

It is evident from above figure that company is maintaining healthy Net profit year by Year…

Mar 2009 -->115.81Cr

Mar 2010 -->121.66Cr

Mar 2011–>131.01 Cr

Mar 2012 -->148.68 Cr

Mar 2013 -->169.49Cr

Currently, company is trading at P/E multiple of 5.49 with book value 126.63 Rs

Senior Members opinion/advice/comment highly appreciated

It gave good returns in last two years…

Ion exchage has featured recently on Small Cap Big Idea on Money Control

1 Like

Akash:
Ion exchange:
CMP: 422

Company is leader in water purification

Compound profit growth over 26 percent over last 5 year

It has won a desalination project in Sri Lanka

Margins are improving and has got approval from USFDA for pharma resin compound manufacturing recently

Company has global presence and is getting good response outside of india…

company is well poised to benefit from the revival of
industrial activity in the Indian economy. The increasing
government regulations and focus on water and water
management such as the Swachh Bharat Mission, the Clean
Ganga initiative, the National Rural Drinking Water Programme,
along-with stricter enforcement of the environmental norms for
polluted water discharge, reduced carbon footprint, waste water
treatment and requirement of zero liquid discharge plants from
various industries will also drive the demand for water and
wastewater treatment solutions. Your company is simultaneously
making good headway in the international markets where
demand for such water and waste water management solutions
continues to be good with increased requirement for Company’s
speciality chemical and resin products.
company is strategically well positioned as one of the
leading players in the organised water solutions industry in
India and one of the very few companies providing end-to-end
water solutions to its customers, from engineering equipments
to water treatment resins and chemicals to consumer products.

Govt is going to spent two-three thousand crores a year for namami gange mission…

Modi has taken control for namami gange and of support of yogi will make a fast traction of the project:

Ganga Cleanup:
Sewage frm 118 town:4800mn ltrs/d
Functioning capacity to treat sewage:1017mn ltrs/d
Ion exchange with market cap less than 600 cr to be a big beneficiary as small chunk of projects can put the company to next orbit

As per last annual report company has made water wendig machine at competitive price to grab huge opportunity of Indian Railway contract for low cost water at railway stations

Getting good traction in Soudi Arabia

International Contracts
Contract for a 10,000 m3/day effluent treatment plant, 5000 m3/day water treatment plant and 300 m3/day DM plant consisting of a high rates solids contact clarifier and auto filtration units from the largest paper mill in Saudi Arabia, awarded against international and local competition.
http://www.ionindia.com/news/archive.asp

So over-all a lot triggers to come in short time…which can take the stock price higher

Getting good traction in Soudi Arabia

International Contracts
Contract for a 10,000 m3/day effluent treatment plant, 5000 m3/day water treatment plant and 300 m3/day DM plant consisting of a high rates solids contact clarifier and auto filtration units from the largest paper mill in Saudi Arabia, awarded against international and local competition.

http://www.ionindia.com/news/archive.asp

So over-all a lot triggers to come in short time…which can take the stock price higher

4 Likes

Probably the first time the company’s coming out with an Investor’s Presentation:

No, they have it for sometime. Please see link below:
https://ionindia.com/aboutUs/investorRelations.asp

1 Like

Decent Q3 Dec-2018 results from Ion Exchange:
While the profitability has improved, the revenue growth is still muted. This is despite the company having good order book.

https://www.moneycontrol.com/news/business/earnings/ion-exchange-standalone-december-2018-net-sales-at-rs-249-85-crore-up-2-84-y-o-y-3431181.html

Results out today and much better compared to the results on the street.

My major concern here is why has an industry leader and initiator(zero’b) not been able to capitalize on their name brand? Almost everybody has heard of Zero’b but they hardly have market share.

They weren’t able to market as effectively as the other players. Of course, we’d all like it if they got their B2B game back. But they’re doing quite well in B2B and would do good for themselves to continue just that. They’ve got excellent FCF.

Since Zero’b is a household name, I don’t think marketing was an issue. It’s more about product availability. We had to purchase 2-3 water purifiers a couple of years ago and there was no sign of Zero’B in any shop. They are losing a big opportunity here since in our school days Zero’B was an alternative to drinking water where Bisleri were not available.

Secondly, B2B business is growing but there are bigger players out there too.

Marketing is not about just advertisements. It’s the whole gamut of things that make it easier for the customer to buy the product. Edit: I just realised I used the wrong word in the last post. I meant to say they weren’t able to ‘market’ effectively.

Anyway, currently, I feel they’re better off concentrating in the B2B space itself. If they’d like to venture into B2C again, it will require massive Reinvestment and cooking up a new strategy by the management, both of which they can’t afford to do what with the large inflow of B2B orders. And it’s only likely to increase from here on out.

I’d love to see them try though. Maybe start with a small customer segment to test the waters.

Starting small in B2C is precisely what I am suggesting. Additionally, I am happy with their B2B growth but would be happy with more.

I see in the investor presentation page 38
https://www.bseindia.com/xml-data/corpfiling/AttachLive/4a9d6331-6c16-4059-8daf-d5f801943190.pdf
They have 67.2+195.9=263cr cash. But still they have 33.4 Cr Long term borrowings ans 112.5 Cr short term borrowings. This is not the first company that I see which has such a balance sheet. Why do these guys take loans and pay interest on them instead of repaying using the balances? The interest cost doesn’t look cheap.

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Most companies usually take some amount of loan just to “keep the account open” in case they need a massive loan in the future (For whatever reason). It’s easier to process a bigger loan if they already have an active account with the bank. This relates to Long Term Loans.

The bigger reason is of course, Working Capital (Short Term) loans. These loans are required to be taken once in a week or so and rotated soon. As the name suggests, these loans are used to fund the daily activities of the company in question and are hence done on a JIT (Just In Time) basis.

The company can choose to use their own Cash for this purpose. But companies usually build up cash balance for bulk deployment in CapEx / Capacity Building. They don’t use it for Working Capital.

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Though what you are saying may be true, I cant seem to agree with it. Just because I want to get a loan at say 0.5% lesser interest, will I keep maintaining a loan and paying interest? That looks a foolish idea.
Same is the case with working capital loans. As I understand WC loans are more expensive compared to long term loans.
I just took average of the FY17 and FY18 debt numbers (111+165)/2= 138Cr and on that they paid 22Cr interest which means the interest cost is 22/138 = 15.9% . We can differ on whether average debt should be used. Also the composition of long term and WC loans and hence proportional interest costs can be different. But the point here is paying such high interest doesnt seem the right way

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Not sure if anyone else is tracking this. But Ion Exchange posted excellent results for the year.

a494155f-3a90-40e5-b0f2-73715ee149da.pdf (2.8 MB)

~10% Increase in Revenues
~65% Increase in Profits
~Increased Capex
~Increased Interest Cost / Debt
~Stable Working Capital

6 Likes