Its an interesting case:
Mcap is approx 6000 Cr
PAT from 2008 onwards:
In INR Cr 335, 392 365 664 574 467 310 323 327 881
So 10 year total PAT is 4638 Cr
CFFO from 2008 onwards:
In INR Cr: 146,718, 126, 610, 1262,16, 755, 684, 950, 93
So 10 year total CFFO is: 5360 Cr
And 10 year total capex is 3152 Cr
ROE from 2008 onwards:
116% 47% 30% 48% 27% 18% 10% 11% 11% 28%
The worst was 10% in 2014
Those are just numbers.
How can we distill the business to a simple understanding?
Right now, its the 2nd largest Calcined coke maker in the world. ~ 2MTpa : LTM Rev: 4054 Cr
The largest Coal Tar Distiller in the world - ~1.3 MTpa : LTM Rev: ~7200 Cr
Has a 4MTPA cement plant in India - no debt and @60% capacity util.
LTM PAT is ~ 950 Cr
But what will the business be a few years from now?
They are pushing their chemicals division to a higher quality standard - they want to expand their advanced chemicals portfolio and get into more margin accretive businesses.
So while they could harp on about how they supply to Lithium Ion Battery makers, they instead choose to put real money into something as odd as Hydrogenated Hydrocarbon Resins. $66 M or so. While investing in their other products quietly.
Using Petro Tar as additional feedstock for their distillation ops. Increased capacity by 200kT
Elysis - the technology by Rio Tinto, Apple, and Alcoa and the Canadian govt. could be a problem.
Theoretically, it could make the aluminum anode business useless;
Practically, it needs to be
a Proved to work consistently.
b Proved to work at a reasonable cost
c Proved to have adequate supplies for their process - For more than 60 MT of smelting capacity globally.
d Capex required needs to be beneficial to smelters
e Capex needs to be feasible at a technical level
One can only wonder how and why a smelter might move to a new technology if it can disrupt operations.
As someone once said: Outcomes are not usually binary.
But this is a real fear.
Their debt maturity is pushed to the year 2025; and is at a cost of ~5.25-5.5%
Total Gross debt $1155 m; cash of $ 100 m
Incidentally, the last time they had less cash than $100 m was in Dec 2010
The management has always made sure they have a good amount of cash on their books + Unused revolver = $139 m
New CPC plant in Vizag will push their capacity to 2.37 MT globally. Capex: $65m
But all this is not simple enough.
So lets try again.
A geographically diverse business, in many business segments, run with a sharp focus to increase cash flow per share.
Run by very able management that has invested when others quit, that has not invested when others pushed
(quite a few projects have been mulled over/ announced and then shelved), that has acquired when the correct financing was available and the price good enough;
And most importantly, has steadily made the business more diversified and stable.
The management has always been media shy and I have not yet found a red flag.
In fact, I believe that the MD did not take a salary for 2 years after acquiring CII Carbon in 2007. (Based on annual reports)
Their consistent message has been to serve their customers well.
LTM PAT ~950 Cr
ROE ranges between 10-30%
Would love some feedback on what makes this a poor/ bad business.
And if there are any big holes in my understanding.
We are all here to learn.