Sadhana nitro :a Dog or a Horse?

[akash123]

Hi friends ,
Have been following this spot since Jan , Indeed december last year … Its slow motion movements and less popularity made me think that you all may like to have a slight glimpse over it …

As a part of breaking the ice , let me give some idea about the Company …

Key statistics :
Category : dyes and pigments
location :mumbai
1 year return : 666.61%
Mcap : 394 ( microcap )
Book value :33.68
Deliverables current : 83.51
Pe ratio :12.58
Ind pe: 21
Fv:10
Peg :0.79
Intrinsic: 429
Eps:33.3
Shares outstanding :9.2 million
Price to sales ratio : 3.45
Last dividend reported :1
Debt to assets : 37.68%
Profit margin : 30.38%
Equity share capital : 9.32 ( was constant at 9.2 for few earlier qtrs)

25may eod :-
Cmp :423
Bids pending: 107409 , offers 0 , traded quantity for 25 may :2459

About sncl :
Sadhana Nitro Chem Ltd. (SNCL) is an ISO 9001:2008 firm producing high quality chemicals since 1973 .

• Engaged in the manufacture and marketing of : Nitrobenzene ( C6H5NO2) , its downstream derivatives and other intermediariess for various applications in aerospace, pharma and agro, optical brightening agents, plastic additives, special fibres, epoxy resin hardeners, dyes and performance chemicals.( Azo dyes , direct dyes , reactive dyes , florescent brightening agent , colour dyes , leather dyes , hair dyes , agro chemicals , pharmaceutical and m fibers ) , aniline , light stabilizer , textile printing oxidizing agent , electroplating agents , etc

• Derivatives and products other than Nitrobenzene and meta amino phenol are : 1. 33DDS ( dinitro diphenyl sukhane ) 2. M/Acid ( metalinic acid ) 3 . Aniline 2,5 disulphonic acid , 4 . Aniline 2,4 disulphonic acid 5.btca ( butane 1,2,3,4 tetra carboxylic acid ) 6. Dibutyl ke to acid 7. 3,3 diamino diphenyl sulphide 8. Sodium meta Nitrobenzene sulphonate 9 . Colour formers 10. N,N dietyl meta amino phenol

• In order to provide immediate and assured service to the vast European clientele, SNCL has also set up a 100% subsidiary Anuchem b.v.b.a. in Antwerp, Belgium.

• SNCL is a government recognized 2-Star Golden Export House. ( Means ministry of commerce has awarded them golden status certificate for 3 terms or more and they will enjoy that status irrespective of performance henceforth )

** New developments : 2018

1. Name change evoting approval ( sadhana nitrochem to sncl limited)
2. Acquisition of business of Spidigo Net Private Limited ( paid up capital , rs 100000/- turnover 9.985 crores , category :internet service provider )
3. Strix wireless system private limited 's shares acquisition evoting ( paid up capital of 3920010 /- turnover of approx .9973 cr for 2016-17 ) : category : wireless and networking technology hardware and software
4. Loans and securities wrt section 186 of companies act 2013 http://www.rna-cs.com/insight-on-section-186-of-the-new-companies-act-2013/
   Additionally , investment limit of 25 cr over and above ceiling
5. Solar power plant with battery backup costing 4.28 cr acquired from PAE renewables pvt limited
   Some of the earlier devp: http://www.sncl.com/newpdf/Out%20come%20of%20%20BM%20100317.pdf

• Website : http://www.sncl.com

Statement facts :
total current assets : 35.7
Total current liab :52.21
Yrly bottom line up by 15 times and income from ops doubled hence prompting towards a growth story

Guys all of you you are welcome to provide your views on this please …

Wish u a lovely investing career with a tinge of golden flakes

@Article in business standard

Sadhana Nitro Chem standalone net profit rises 1648.80% in the March 2018...

Sadhana Nitro Chem standalone net profit rises 1648.80% in the March 2018 quarter
Capital Market | | Last Updated at May 02 2018 09:04 IST

Sales rise 166.82% to Rs 51.39 crore

Net profit of Sadhana Nitro Chem rose 1648.80% to Rs 21.86 crore in the quarter ended March 2018 as against Rs 1.25 crore during the previous quarter ended March 2017. Sales rose 166.82% to Rs 51.39 crore in the quarter ended March 2018 as against Rs 19.26 crore during the previous quarter ended March 2017.
For the full year,net profit rose 3237.23% to Rs 31.37 crore in the year ended March 2018 as against Rs 0.94 crore during the previous year ended March 2017. Sales rose 92.97% to Rs 110.55 crore in the year ended March 2018 as against Rs 57.29 crore during the previous year ended March 2017.

Particulars
Quarter EndedYear EndedMar. 2018Mar. 2017% Var.Mar. 2018 Mar. 2017% Var.Sales51.3919.26 167 110.5557.29 93 OPM %37.9812.20 -31.4615.10 - PBDT18.271.76 938 30.162.86 955 PBT17.811.25 1325 28.280.94 2909 NP21.861.25 1649 31.370.94 3237
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Disclaimer : 1. Not invested though wanted to 2. 2. Wanted to bring in a healthy discussion for all the experienced& honourable members of the forum 3. Can someone please help me with the Detailed Risk Analysis based On Fundamentals … ( Long term perspective )

Citing 2 risks related to shirt term holding / trading : 1. Too little volumes per day (hovering around 2-3k ) 2 . Uc / lc stock( locking trends in general )

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Regards ,
A little disciple

[zoro99]

Thanks for starting a thread on this company.
It came to my radar when promoters started buying in Jan but after that there were no sellers. FInally I did a small investment in this company around 225 and sold at 100 % profit in few weeks.

Reason was I could not find what suddently changed for this company to show such excellent numbers.

Nitro-benzene prices havent changed much, then how is this company earning so much ?

Why are they acquiring unrelated companies ( wireless, ISP etc) ?

[akash123]

Hi ,

Thanks for the reply buddy …

• I guess the drastically good results coupled with series of acquisitions seems a reason . * However ,release of pledged shares(55 lacs from Manekchand Panachand Trading investment co ltd ,which held approx 63% of total shares ) is a concern now as per the latest bse notifications released on May 15 ,2018 .

The exact words in the BSE notification :

Subject : clarification for release in encumbrance of shares pledged

• Out of the total holding of Manekchand Panachand Trading Investment Co Ltd , 55lac equity shares of sncl were pledged .On clearance of dues corresponding to the pledge , the said shares were released on April 24,2018 . The co had informed bse on May 4,2018 . Reason for release of encumbrance is repayment of loan to the pledge .

• Also , i don’t know if I am getting it right ,. But check it out once for your reference if the following article makes sense : https://www.financialexpress.com/market/invocation-of-pledged-shares-falls-in-q4-of-fy16/233913/

• If you are experienced enough wrt impact of release of pledged shares or have some idea , would love to hear further from you …

I could find out that shares were encumbered on jamnalal sons private limited on 24 April 2018 by Manekchand , and jamnalal further went ahead and sold 55 lac shares of sadhana on 24 April 2018 , transaction type : release of encumbrance
( Cross checked it with investor trades data )

1 .https://www.bseindia.com/xml-data/corpfiling/AttachHis/273C38FC_18E1_439A_B1B5_857C89AB16EB_143137.pdf

2.https://www.bseindia.com/xml-data/corpfiling/AttachHis/2FC2D5AE_5B37_47B8_B3AF_5B80DFB48CCA_121852.pdf

Thanks and regards ,
A little disciple

[zoro99]

It seems the pledged shared were released. Which seems to be good for the company and means whosoever had pledged has repaid and got the shares released.

But my main concern/curiosity is what improved so drastically in last few quarters ?
And is it sustainable ?

[vikas_sinha]

Q1 results same as previous quarter, 40x jump on YoY!
Overall as expected.

ad40f96b-c71c-4738-b07d-02f7036a755b.pdf

Discl: 7% of PF, invested since about year ago.

[vikas_sinha]

45th Annual General Meeting of the company will be held on Thursday August 30, 2018 at 03:00 P.M. at Sheth Hirachand Gumanji Trust Hall, Hira Baug, 1st Floor, Kasturba Chowk (C.P. Tank), Mumbai-400004.

[Tarak]

Some of Observations on Sadhana Nitrochem from AR 2018 are:
a. Raw Materials - Benzene, Nitric Acid, Caustic Potash, Sulphur Based chemicals, Iron Powder.99.5% value of the Raw Materials is indigenous and balance 0.5% of the Raw Materials is Imported
b.Debt/ Equity ratio 0.31. Debt Reducing
c. No Shares Pledged. All pledged shares have been released in Apr 2018.
d. It has a subsidiary Strix Wireless Systems which is amking a loss of 2.5 Cr in FY 2018 against income of 0.55 Cr in FY 2018
e.Exports constitute about 76% of total Sales

[b_tyagi]

Another interesting info in the AR 2018:

[Akshaykumar]

It is still not clear to me, what has lead to such a dramatic change in company’s earnings. Please if someone could throw light on it, wud be greatful.

[ayushmit]

The co has uploaded a very detailed note and its an interesting read to understand about the company and the changes in the industry - https://www.bseindia.com/xml-data/corpfiling/AttachHis/f24cef81-4fb1-455a-bf27-e4c3113651a5.pdf (look for last 4-5 pages)

This is been a crazy story of turnaround and shows the effect that the China issues can have. This is the reason why most of the chemical stocks continue to buzz.

Ayush

[Anubhav4anubhav]

The company says new tech acquisition is complimentary to their business and further explains that it creates a product and exports it just like the parent . So, the management is saying any business that creates a product and exports it is complimentary. Is it that simple.

[maninder.nitw]

Why diversification … from correct business ? Unusual

[nilwadmalwar]

8a2b140e_ffe1_4eff_a949_49695e2cc744_164431.pdf (37.3 KB)

Stock split is under consideration. Will increase the liquidity also promotors are buying. From their detailed presentation management during the AGM , management looks very good. Has anyone done extensive research on Management. Please share your findings

[sukhlani1]

Hello

This company came under my radar recently when I saw this as one of the best performing scripts in terms of Growth both Top-line and Bottom-line. Plus an appreciation of more than 15x in stock price over last six months, led to curiosity and here are the details on my findings :

1. Name Change - This is a general red flag to me based on my prior experience but looking at the growth , I was willing to discount this aspect

2. Promoter Stake - Decent 74% and that gives us some confidence and it is rising . Lets dig deepere
   a. Pledge - Well from 82% to zero , its a positive but too good to be
   true

3. Acquisition - Why would I acquire unrelated business when my core business is in the best shape of my life ?

4. Rationale for improvement - China really ? Has the price of the core product increased ? Too many question marks still . How can I value a commodity company with 150 Cr Sales at 1100 Cr MCap

5. The EBIDTA is 52% and it has jumped from 12% an increase of 40% in last 4 quarters . But question is WHY ? What happened all of a sudden in 2018 … Still searching for answers

6. All of this happened without any capex … Company has not invested in capex over the last 5 years …

7. Lets analyse other ratios to see if there is some rationale :
   a. DSO : 80 days - improvement of 25% over last year
   b. DSI : 71 days - improvement of 23% over last year
   c. DPO : 167 days - still cant pay the vendors on time
   d. Taxes - Its not a tax paying, even in the last two quarters
   e. Trade Receivables : 13% an improvement of 24% over last year , a
   good one

8. If the company is doing well and cash is real then there are three things I look for : Increased CFO , Decreased Debt and Dividend Payouts - Not sure I can say it is happening for SNCL

Overall , this looks to be too good to be true kind of story especially as we have seen many such stories in the past as well during Bull Market

I reserve my right to be wrong , so pls do your own research.

Disclaimer : Not invested

[Tekumani]

Sadhana_Nitro_Chem_Limited_January_13_2017_RR.pdf (251.5 KB)

[Tekumani]

Sadhana Nitrochem AGM update.pdf (659.7 KB)
https://drive.google.com/file/d/1C2skQkoO5Pcvu901rWIWKCLBs3N1modi/view?usp=drivesdk

[rupaniamit]

@Tekumani - thank you for sharing above documents!

Very interesting things shared in the research report. I am intrigued by there being less than 10 manufacturers in the world for colourformers:

• Less than 10 manufacturers in the world for colourformer including chinese players or now we have less than 10 players after chinese crackdown?

Sadhana definitely has some strong tailwinds behind it.

Disc: not invested

[hegman12]

Balancesheet looks ok and good on first look.

Borrowings have been reduced by half, trade payables are steady, trade receivables have increased a bit but in line with sales, margins have been doubled! EPS jimped from 0.55 to 33 straight up! There is slight increase in cash and most of the cash is generating from operating activity which is a good sign.

Standalone numbers below -

But stock has low liquidity and i think mainly dependent on chaina story. How long will this play out one has to see, ultimately, chaina has to start the production and we might be back to normal state of affairs if they do.