Donald,
Posting the management Q&A in the thread directly may attract the readers. I myself, normally do not go to management Q&A of the companies where I am not invested while I read all the posts in the discussion forum.
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The results are out:
Looks like the forex losses have stopped. The YoY growth rate for the quarter was a respectable 26% in EPS, and 12% in revenue.
Donald, can you plz post the mgmt Q&A of your Sept 2013 meeting?
Thanks.
Quite a concerning development. Lets hope the issue gets resolved in due time and not get tangled in our judicial system.
Regards,
Ayush
Ayush,
Can you advice on the impact of this shut down on EPS? Any info on the below might be very useful in evaluating the same.
1). How many factories does OCCL have in total? I assume only one is shut down?
2). Where do we find the info about the revenue/profit split-up across these factories? Is there some place in the annual report the co publishes these?
Thanks,
-Prasanna
Co has two factories. Mundra plant contributes about 35% of total production.
All the details are available in the annual report.
Ayush
1).
The plant has resumed operations after stay from SC.
The co has produced fantastic results. And it actually looks really really cheap after looking at the results. Net profits are up by 3x when the sales are up by just 20% yoy; When a similar sales increase was seen last quarter the net profit went up by only 26%; The reason looks like the cost of materials consumed went down.
@Ayush: Do you know what is going on here? What would happen to the bottom line next quarter if the top line grew by 20%?
Thanks
Was very much expecting better nos in earlier quarters too but they didnāt come up well due to forex issues. This qtr has come up much better due to reversal of some market to market forex losses provided earlier.
I think the better way of earnings should be the 9 month EPSā¦as it will even-out the forex fluctuations.
Ayush - Forex fluctuations might provide quarterly M2M issues, and from what I understand, the losses were caused due to earlier rupee depreciation and hedging (6-months?); The last quarter did not contain a line item to separate out the forex contribution as it did in the previous quarter. Also the last quarter did not contain the balance sheet. Do you know why?
Any advice on how we could establish the bottom line impact with a top-line 20% sales increase is valuable. For the sake of the exercise one could assume no further rupee movement from present levels.
They provided the forex details only in Q1ā¦since then the same is not being separately disclosed and being clubbed in other expenses.
Balance sheet is required to be disclosed only twice a year i.eā¦ March and Sept end.
Like mentioned in previous message, I expect the stable bottomline to be the aveg of 9m FY14 resultsā¦if the operations continue like normal.
Ayush
Reproducing the math for the sake of others:
100*(5.96 + 7.82 + 13.52)/(60.30 + 65.28 + 63.73) = 14.42% NPM
Expected top-line with a 20% revenue growth = 68.4Cr
Expected bottom-line with 14.42% NPM = 9.9 Cr
Bottom line growth % = 25% in the above scenario.
Hi all, the company seems to be back on track with two back to back good quarters.
http://www.bseindia.com/xml-data/corpfiling/AttachHis/Oriental_Carbon_&_Chemicals_Ltd_290514_Rst.pdf
They have done an EPS of 39 for FY14. If they repeat the similar performance of last two quarters they may do an EPS of 50 in the current fiscal.at the cmp of 230 it is available at very attractive valuations of less than 5 times fy15 earnings. Debt levels are also slowly coming down.Is anyone still following this company? any new development on the capacity expansions and on the case related to mundra sez?
Dear Kranti,
I have recently started to follow the company and have gone through the thread of OC very quickly. The level of hard work done by fellow members is very detailed and this company seems to have a easy to understand business.
Recapturing the important questions that need to be answered to understand the company and its future prospects as on today :-
1). What is the Current IS capacity? From this we can understand the plant utilization levels with the help of the sales numbers.
2). Where does the price of key raw materials like Sulphur and Nepthanic oil stand currently and projection for FY15?Another Important factor is Crude oil price which is around 107 USD and projections being made that it may rise upwards to around 120 USD levels.
3). Contributions to Sales from European markets?Is it showing signs of revival and increase in demand going ahead?
4.Levels of Plant utilization capacities of Radial tyre manufactureās in India and across Europe , are they operating at full capacities? Which I think is a proxy for demand trends for the automotive sector and for OCās -IS. This may help us understand demand of IS.
5). The Commissioned capacity of Sinorgchem China especially there plant at Taizhok Sinorgchem Tech. Co. Ltd. Is it at 15,000 MTA? Has the demand been completely absorbed by the Chinese market? Also the quality of there product offering of different grades of IS as compared to OC.
These are some the questions I seek to find the answers to better able to predict the probability of company showing YoY growth!
Views invited.
Disclosure. Tracking position.
Sulphur/Oil pricing / Dollar price - Factors having impact on IS production cost.
The price of OCās IS is mainly dependent on RM Sulphur. So to understand better the inc or dec in cost of production , I tried to find the factors that determine the Sulphur import pricing in India. Below is my understanding :-
1). Sulphur is mainly recovered from Oil and Gas refining process as by product. With increase in demand for oil and gas, the production of Sulphur is going to increase. Supply side constraints are likely to reduce going forward because of more efficient technology , increased oil production in middle east as also increase in Sulphur recovery capacity of oil producing countries . Positive.
2). Sulphur is required in high quantities by the Indian and world Fertilizer and other industries for ex Coromandel, Deepak , etc. DAP ( ex of Non urea fert) is largely being imported by India from Countries like China, Saudi, USA etc.What I have come to understand, I may be wrong, is that demand for DAP is directly proportional to Sulphur prices i.e. low DAP demand means softer prices of Sulphur. Currently it seems from information I could gather is that DAP demand is stable and thus prices for Sulphur also should not show to much volatility. Positive.
3). Approximately the current spot is around USD 195.00 for July delivery. June delivery prices were around USD 155-165/t cfr USD.
4). Dollar price is Stable. Positive
5). Oil prices look to Stabilize around 105 USD as Iraqi production continues with chances of reduced disruption going forward. Positive.
6). Indian Budget is about to be announced and clarity is awaited on subsidies to be offered for the fertilizer industry and who then will start placing larger import orders for ex DAP. In anticipation of this China, who is major exporter is expected to show increased demand for Sulphur . China is major consumer of Sulphur and itās inventory levels have been less compared to previous year. If policies and monsoon both our favorable then increased demand from INDIA most likely will cause Chinese to increase their stockpiles of Sulphur required to manufacture and export DAP. This could move prices higher. Negative.
Overall- Increased production capacity of middle east countries is likely to stay much ahead of demand from INDIA China and the Indian subcontinent. Prices of one the key RM of IS should remain stable.
Next I would try and find information on the product capacity and quality of OC compared to others.
Isnāt the opportunity size quite large for OCCL as it caters to almost all the tyre majors of the world except for Michelin n radial tyres sales is increasing ??
Eversince quarterly price revision has been ontroduced by Solutia earlier drawback of carrying the price fixed for whole year is gone. Alongwith operating leverage as 22500 Mtpa capacity is in operation n EOU benefits from Mundra n dharuhera plants the earnings have been improving nicely for last few qtrs. With Modi govt at hel Mundra plant problems will be a thing of past.
Dividend has been increased to 7 Rs per share PE is 6 n ROCE is 30% consistently over 3 years n with speciality chemical sector getting new fancy in market isnāt Occl due for rerating?
Views invited.
Hi Prashant,
I am also looking to enter the stock. The Operating Margin and the Sales growth look very good and looking at the future demand from Auto sectorā¦Potential market size also looks promising.
However I am a little concerned about the valuation partā¦being a newbie this is one art I am trying to pickup here. Wonder if one of the seniors could help me with that.
Regards
Sreekanth
What a move on Oreiental Carbon today touching 400.
Hope several VPers are riding it benefitting from tremendous groundwork done by our selfless taciturn Hero Ayush. Take a bow.
Seems Occl is on its way to become another classic VP multibagger on lines of so many others.
In todayās bullish time where else will you find a stock at FY 15 forward PE of 6- 7.6 , ROCE of 28% n pricing power a NPM of 15% yes you read it right 15% n a solid entry barrier n ever increasing opportunity size, Mundra plant running at full stream as MOEF approval is there since last 1 month n exports become all the more competitive,cash of 20 Cr on books, increasing radialization of tyres , RM sulphur softening, rubber price at 5 year low benefitting their main customers n in turn them as well,new 3rd generation dynamic Goenkas taking charge n expanding the capacity further . Mundra plant has addl land where another 11000 MT capacity can come up.
All in all a classic case of Make In India world class product catering to the whole world. Story to abhi shuru hui hai IMHO. Discl invested n BT more recently as well.
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I was wondering if OCCLās valuation ran ahead of its fundamentals. But the āMake in Indiaā campaign has re-ignited some hopes and OCCL could largely benefit from it.