Multibase India Ltd

Stock Opportunities
1

am posting an old note on the company. Keen to get inputs / observations from anyone tracking the business.

link to the 2011 AR:

http://www.bseindia.com/bseplus/AnnualReport/526169/5261690311.pdf

Q2 numbers:

http://www.bseindia.com/xml-data/corpfiling/AttachLive/Multibase_India_Ltd_101111_Rst.pdf

Multibase India Ltd ( BSE Code :526169) is currently in its 20th year of operations.

Primary products: Thermoelastic Elastomers, Thermoplastic master batches.

Plant location: Daman

Market positioning : Market leader in its category of products.

Parentage : 75% subsidiary of Multibase SA, France which in turn is a subsidiary of Dow Corning, USA

Multibase India is a specialty and technical chemicals manufacturing company. It is engaged in the manufacture and distribution of thermoplastic elastomeric compounds and silicon enhanced products. The company offers a wide range of polypropylene compounds, thermoplastic masterbatches, thermoplastic elastomers, and siloxane masterbatches. Its product rangeincludes TPSiV, a thermoplastic silicone vulcanizate; Siloxane Masterbatches, Multibatch, Multi-Flex, Nylex, Multi-Pro, and Multi-Flam.

User industries for primary products of Multibase:

Automotive

Asthetics: Car mats, IP/DP center console skins, control panel knobs, seat belt housing, hand brake, cup holder, A/C grills and components

Fluid Transportation:Air Duct Housing, Window cleaning duct

Safety: Driver Airbag covers,Passenger Airbag Covers, Knee Airbag Covers , Side Airbag Covers, curtain Airbag Covers

Weather Seals: Static & semi dynamic glazing seals, Acoustic Seals, Asthetic seals, Thermal seals

Structural parts: Dash board, Door panel, centre console,Wheel trims

Consumer:

Health, Personal Care, Cosmetics: Tothbrushes, Razor handles, Hairbrush handles, cosmetic packaging

Houseware:kitchen utensil,small appliances ( irons,kettle), washing machine

Sports: swimming accessories ( flippers,mask, snorkel)

Personal electronics: Mobile phone housing, ear buds,key board

Industrial:

Wire & Cables:Optical fibre,pipe extrusion,HFFR wire & cables

Electrical protection:Electrical switch,Electrical housing, Electrical contactor

Fluid & product delivery:gaskets and seals,water cooler seals,flexible plumbing,hose & tubing

Packaging: Carrier bags, woven sacks,Stationery (interleaf sheets, folder covers), thermoformed food trays, Corrugated PP boards

Window seals & gaskets: window seal, door seal, refrigerator seal

Financials:

Paid up Equity Capital : Rs 12.62 crore

Debt: Rs.0.93 crore

2009-10:

Revenue: Rs.32.84 cr

Profit before tax: Rs.3.50 cr

Net profit: Rs.2.70 cr

EPS: Rs.2.13

Dividend: Nil

6-months ended Sept 2010:

Revenue: Rs.19 cr ( 10% growth yoy)

Profit before tax: Rs.1.53 cr ( 25% de-growth yoy)

Net profit: Rs.1.02 cr ( 48% de-growth yoy)

Key Catalysts:

  1. Increased volumes/sales :The company has been increasing its presence in the Automotive sector in India. It offers a wide gamut of applications to this sector, as detailed above. Increased volumes will have a high positive impact on bottomline.

2)The current installed capaicity is 6000 TPA. Current capacity utilization is less than 30% of the installed capacity. So, Multibase can over the next 3-4 years comfortably reach a 100 cr plus turnover without any capacity expansion.

  1. Delisting â though this is more in the nature of optimistic speculation, it canot be ruled out considering the growth prospects.

  2. Mandatory Air Bags in 4 wheelers: It is expected that over the next 3-4 years, Air bags as a safety feature may become mandatory for all new 4 wheelers , just as seat belts were made mandatory a few years back. The proposal is currently with the Ministry of road transport and highways and may come up for consideration when the amendments to the Motor Vehicle Act are notified.

At the current price of Rs.29 per share, the company may seem overpriced on the traditional PE scale. However if one considers the growth prospects for its products , market leader status and strong parentage, it appears a good investment.

4 Likes
2

Hi Jayendra,

Are you still tracking this company ?

Price has done well in the last few months as Govt. made it mandatory for all car’s to have Air bags by Oct 2015.

Company meanwhile has been giving decent numbers.

Do we have any info to dissect the numbers more and see what kind of growth can be seen in future owing to the air bag business.

3

Somre good resources on Multibase and Air bag industry in general

1.Multibase Automotive Airbag Material Range

http://www.dowcorning.com/content/publishedlit/80-3929-01_multibase_automotive_airbag_range.pdf

2). Report on Airbag industry

3). Presentation from Autoliv , the market leader in Airbag industry

http://www.autoliv.com/SiteCollectionDocuments/ALV%20General%202013.pdf

1 Like
4

what about quality of mgmt ??

Div payout is zero. even when promoter holding is high.

Assuming the mgmt wants to reinvest the profit for growth of the business, but the numbers doesnt add up. The growth in revenues in last 10 years and in last few years is hardly exciting.

1 Like
5

HI,

Dow/Multibase provide chemical to manufacturers of Airbag or they manufacture airbags.

As I understand they provide chemical, if so then who are big airbag manufacturers ?

Who will benefit more Chemical supplier or manufacturer?

Multibase AR is not very helpful.

Disc: Invested due to :

  1. Big Opportunity

  2. Big promoter

  3. High margins

6

Sir, Many thanks for recommending this stock long ago. Today the company has submitted to BSE a copy of Recommendations of the Committee of Independent Directors on the Open Offer to the Shareholders at a price of Rs.246/-. The price shot up 15% and closed at 287.

Could you kindly give your views - if it is for delisting and sell at what price ?

Thanks and warm regards,

1 Like
7

Is the govt. has already mandated to have airbags or its mandatory from October?

9

hi… anyone still tracking this company… If yes can you please share your views…for growth prospects and all

1 Like
10

MULTIBASE INDIA

Its a subsidiary of Dow Corning. Parent owns 75% stake in the company.

PRODUCTS

Silicon based thermoplastics, thermoplastic elastomers, masterbatches, etc. It has a range of products some of which are commodity type and others are specialised products. The user industries include automobiles, personal care, stationery, wires and cables, consumers and industrials, telecommunications, personal hygiene etc.

User industries for primary products of Multibase:

Automotive

Asthetics: Car mats, IP/DP center console skins, control panel knobs, seat belt housing, hand brake, cup holder, A/C grills and components

Fluid Transportation:Air Duct Housing, Window cleaning duct

Safety: Driver Airbag covers,Passenger Airbag Covers, Knee Airbag Covers , Side Airbag Covers, curtain Airbag Covers

Weather Seals: Static & semi dynamic glazing seals, Acoustic Seals, Asthetic seals, Thermal seals
Structural parts: Dash board, Door panel, centre console,Wheel trims

Consumer:

Health, Personal Care, Cosmetics: Tothbrushes, Razor handles, Hairbrush handles, cosmetic packaging

Houseware:kitchen utensil,small appliances ( irons,kettle), washing machine

Sports: swimming accessories ( flippers,mask, snorkel)

Personal electronics: Mobile phone housing, ear buds,key board

Industrial:

Wire & Cables:Optical fibre,pipe extrusion,HFFR wire & cables

Electrical protection:Electrical switch,Electrical housing, Electrical contactor

Fluid & product delivery:gaskets and seals,water cooler seals,flexible plumbing,hose & tubing

Packaging: Carrier bags, woven sacks,Stationery (interleaf sheets, folder covers), thermoformed food trays, Corrugated PP boards

Window seals & gaskets: window seal, door seal, refrigerator seals

R&D

Company because of its strong parent has good access to strong R&D and has focussed on silicon enhanced products and engineering polymers. It is continuously on the look out to launch newer products in newer geographies. With the new norms and changes in automobile safety systems, company is increasingly focussing on automobile safety systems where the traditional rubber, plastic and other products are being replaced with thermoelastomeric products.

FINANCIALS

At cmp of 610, market cap of company is 770 crores. Company has equity of 12.62 crores with 1.262 crores shares outstanding. Promoters own 75% and there is no pledging.
As on March 18 , company had cash and equivalents of 52 crores and no debt.

FY 17 Book value is 51 and FY 18 is 67 per share.

Sales growth for last 5 years has been 20%, 16%, 13%, 21%, 31%, 30% since past 5 years wheras profit has increased by 10%, 44%, 37%, 34% and 47%,

There has been increase in NPM from 10% in fy 13 to 17.14% in FY 18. One needs to figure out what the peak margins can b

During FY 14 to FY 17, company has grown its net profits at 38% CAGR.

As seen from above data the company has been growing its sales consistently and keeps increasing its margins and hence ROE.

Going ahead with newer applications of existing products and launch of newer products from the parent’s stable is likely to ensure 20-30% cagr growth for the company.

The parent has many innovative products out of which only a few have been launched in India. This provides the scope of the kind of potential pipeline the company has in terms of launch in Indian market.

INVESTMENT THESIS

Company is a subsidiary of a global leader in the field of thermoplastics and elastomeres which are fast replacing plastics and rubber in various fields.

Company has huge opportunity size as compared to its market capital of 775 crores.

Based on expected eps of around 15.5 for FY 18, company is available at around 40 PE which though not cheap is also not too expensive considering the pedigree of promoters and the space the company operates in as well as smallish size of the company in terms of sales and market cap.

If the company can continue to show the growth shown in the past few years, it could provide decent returns.

17 Likes
11

As crude is the main raw material and from last 3,years crude prices fell from 100 to 30 dollars per barrel and increased margin in business can be seen now that crude has risen impact needs to be seen

1 Like
12

The parent Dow Corning has a 100% owned private subsidiary called Dow Corning India Pvt Ltd which is also into same products. Don’t know why this dual entity presence…

7 Likes
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Company does not require much Capex as evident from last 5 year data (Net block addition is just 5 Cr ) so unable to understand some points regarding CSR and Dividends.
No investments in any debt funds or liquid funds rather 27 Cr in Bank deposits as on March 2017 which gave 1.48 Cr as interest income (5.5% Yield) as per AR 2017.
Can we get any information about their clients
Some excerpts from AR 2017:
Amount spent on CSR for the financial years is NIL (Reason : Company needs to plough back funds for business expenditure). Seriously i do not see this reason justifiable as company has already good amount of cash for working operations.
No dividends despite being debt free and cash rich company .
Around 25 Cr of goods purchased from related party.
1.68 Cr of additional payments to Holding Company and subsidiaries for Royalty , Fixed asset purchase or as Professional fees (13% of Net Profits).

3 Likes
17

Hi, Can someone confirms what the Dividend policy of this company…It seems they amking good money but not paying any Dividend… Is there any reasons for this? Or changes could expect going forward…

18

The company is for a fact managing it’s cash terribly. Considering, they are building up a stockpile of cash probably some M&A in site?

They have a major exposure to Forex which can be disconcerting. A cash build-up can help absorb shocks like the one that might be delivered this year due to decline rupee.

The company has good Bankers in HDFC & SBI. HSBC raises red flags in my mind, but Citi is also good.

1 Like
19

Does anyone tracking this company result seems to be bad due to high crude price is this the only reason ?

20

@hitesh2710
Any new update you can share on would be great Hiteshji. Thanks

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@Chetanpinto

The quarterly results have been affected by currency headwinds. How much of this the company is able to pass through needs to be seen. But over a long period of time these things tend to normalise.

For me it remains a multi year story and I would like to keep watching it in terms of topline growth and how it is derived. The margins might keep fluctuating albeit in a narrow range but as mentioned before margins tend to take care of themselves if toplline growth remains strong.

4 Likes
22

Dupont acquires multibase
https://www.bseindia.com/corporates/anndet_new.aspx?newsid=4382b0fe-74c8-42a4-8d19-f1abc0327035

1 Like
23

How these two companies DuPont and Dow Coning compares in terms of reputation ? Is this good or bad for India subsidiary in terms of alignment or new products possibility etc? Any insight appreciated.

24

Dow and Dupont have merged globally and are world leaders in speciality chemicals. Multibase was a subsidiary of this company and was owned through a subsidiary in France. The owner ship / shares have been transferred to global company. This is not a takeover or acquisition, just change in holding company.

3 Likes