Kiri Industries: Loan reduction and demand surge

(pranjalk2902) #21

Hi everyone! I think there is substantial value in Kiri. I had covered it on my blog on 22nd May on the following link: Kiri Industries Analysis
And by the way, @Ishank I had read your query and concern about receivables. I think I have found a way to answer your query. The books need not necessarily be managed.
Hope I can contribute to everyone’s knowledge about Kiri. Feel free to drop in your comments and views.

(pranjalk2902) #22

Hi @aashish2137 , what disappoints you about the fundamentals now?

(aashish2137) #23

Let me put in another way. There’s nothing that inspires confidence in this company. Would I have invested if the competitor didn’t shut down sky-rocketing the prices? No. Hence it was a trading bet for me which can end badly if one doesn’t exit on time.

(pranjalk2902) #24

Look, what changes fundamentally because of the short term event is that the Balance Sheet strengthens. This reduces the finance costs enormously and that has an impact on the earnings for the long term. It is worth noting that operationally, the earnings of the company weren’t always all that bad, It was the interest cost primarily that would always mask its operational earnings.

The main reason why there is value here is because of the investment in Dystar. It is that asset which is very valuable but is being ignored by the markets. And now we have the catalyst of debt reduction to realize the assets value. This is more of an assets play than an earnings growth play. And to realize the assets value we always need catalysts like the events that are playing out now.

Even if a company operates with zero barriers to entry. I think as an investor you should be willing to pay for the assets value because the business is viable and if the business is viable, then the business must generate sufficient earnings to replace its depreciating assets. Therefore assets value will get realized.

And if you need an exit time, most of the catalysts will have reached fruition by the end of this calendar year.

@paresh.sarjani1 I agree with you that the quarterly numbers haven’t been added properly. Will have to wait for the Annual Report.

(Ishank) #25

does anyone has any clue what is happening here and why the stock price is tanking?

(rajivmansotra) #26

Has anyone attended AGM…Pls Update

(baadal791) #27

Anyone knows why the stock is in free fall lately. The earnings didn’t seem bad. How bad the effect of demonetization on Kiri

(aashish2137) #28

You might want to check if the Chinese industry has resumed operations that could be a huge negative for Kiri

(Ishank) #29

Kiri is least impacted among indian players if chinese production resumes, as much of the value of kiri comes from its holding in a chinese company- dystar.

(aashish2137) #30

True, but the Chinese markets hold over 80% of global supply and their shutdown pushed product price 3x which benefitted Kiri directly. Even with Dyestar holdings, market valued Kiri under Rs. 100. The sudden interest in it came only when Chinese production came to an abrupt halt and pushed prices.

(pranjalk2902) #31

I am posting the link to download the Q2 conference call of Bodal Chemicals. There were some very interesting and pertinent questions about the Dye intermediates industry which have been answered by Ankit Patel the MD of the company. This will also be relevant for Kiri. Some of the questions were like: How are the prices of H-Acid and Vinyl Sulphone likely to remain over the long term, what will be the impact on prices of dye intermediates when Chinese plants open, especially Hubei Chuyuan and so on.
The sum and substance of what he has explained is that the Chinese plant closures were very serious issues and they are not going to come back on stream in a hurry. Hubei Chuyuan is not expected to start any production in this calendar year and is expected to start production in the next year only. What’s more is that they will start first only with dyes and then slowly and steadily get into manufacturing of dye intermediates where investment in pollution management infrastructure is high. So he expects that whenever the Chinese plants come on stream they will not have a sudden impact on the prices of dye intermediates. One can even read the transcript of the concall of Shree Pushkar Chemicals and Fertilizers and the MD’s letter to shareholders in the AR 15-16 where their MD Mr. Punit Makharia has expressed similar views.

(vibs6615) #32

Came across this article recently which claims that dystar case might have an outcome by H1 2017.

(Pramod) #33

According to BSE filing dated 20/03/2017, Vikasa India EIF1 Fund has increased it’s holding in Kiri Industries from 3.45% to 5.46%.

Does anybody have idea which fund is it?
The fund is increasing it’s stake : does it augur well for retail holders? The fund manager must have done due diligence and probably must have some news regarding dystar value unlocking in the coming 2/3 quarters.?!

Disclosure : Invested

(csteja) #34

@Kiri Investors, @aashish2137, @pranjalk2902, @paresh.sarjani1

New to this sector. Need some inputs.
Why is the top line stagnant for last 1.5 years despite increase in chemical prices. Also, why raw material costs getting low ? I see there is some debt reduction on balance sheet. The bottom line growth mostly appears due to debt reduction rather than higher chemical prices.

(bbbhutra) #35

I believe in the current week, china close more 3-4 plants and hence we can see chemical prices rising again by 10-20%.

(pranjalk2902) #36

@csteja, One thesis for investing in Kiri a year back was to play this debt reduction theme you have alluded to. In fact, as is very clear from a cursory glance at the 10 year Income Statement, high debt (finance costs) has been the nemesis of the company in the past. Standing today, I think the debt reduction theme has pretty much played itself out given that the debt is now well within manageable limits (debt to equity at around 0.5). And if someone had bought the stock a year back to play this theme, current prices can be a good point to book profits.

So going forward what could be the rationale for an investment at current prices or holding one’s position at current prices?
Well, I think the only reason one could have to hold the stock is the hope that management will be able to get relief from the Singapore courts in the Dystar issue and unlock the value in there.
Having said that, a key risk going forward is that in 2022 around 2.05 crore new shares will get issued to FCCB bondholders which would increase the total shares outstanding to 5.18 crores.
I have covered many other concerns I have come across in the last 10 months and written a review article in which I have attempted to value the company in a scenario based analysis:
I think you can be more conservative with certain numbers if you choose to and work out your own estimate of intrinsic values for various cases. Hope this is instructive!


Good post! thanks for putting together nice analysis… Don’t you think siphoning of funds will weaken the case of the Chinese group in SG courts?

(Pramod) #38

SP Tulsian today has recommended a buy on Aksharchem ; the basis for which he has explained is that 2 listed companies out of 3 dye and intermediate companies have been causing pollution with the possibility of shut down of plants in Padra near Vadodara.

Kiri is having plants in Padra, Vadodara. Does any of you have idea how many plants kiri has in India and out of them how many plants are in or near Padra? Which might be the other company which may have been referred to in the context? If pollution concern arises, it will be a serious concern for functioning of plant leading to shut down; loss of topline leading to decrease in stock price.

(Pramod) #39

If we see the company history in moneycontrol. asahi sangwon and kiri are having plants in Dudhwada, Padra, Vadodara.

(hazariwalapu) #40

I have no idea regarding which companies Mr.tulsian is talking about but Kiri is spending money to make Zero liquid effluent discharge. and they have mentioned same in their annual results and presentations too.