Shree Pushkar Chemicals


(Mridul) #21

Few main points from the q3 concall -

  1. Chinese players have started production from Jan. Mgmt isn’t worried. Impact seen - minimal… as the change there is structural in nature (these Chinese players were very competitive earlier as they were not following environmental norms. This will not be happening in future.). he expects major shift happening in this industry with manufacturing coming to India from China and from other developed nations in next 2-3 years.

2.On slower q3 - Due to lower dye intermediate price realization (H acid, vinyl sulphone) and also demonetization impact on their clients. But they said there is nothing to worry, as the dye intermediate prices are now in stable and more rational zone, and because they are even maintaining their guidance despite these lower realization levels. Lots of the intermediates are being consumed internally, and this ratio is going to increase big time going forward with additional dyestuff capacity coming online.

3.Next set of growth in q4 will come from H acid plant (750 tonne)

4.3000 ton of new dyestuff capacity will come online by q4-q1. So will start contributing from q1 probably, but more meaningfully from q2.

5.Business is really doing well and demand is picking up.Market efforts for gaining new clients on full swing. Have reaped good results.

6.Next big trigger will be the foray into textile chemical business. Plant has been built and they are int he process of importing the machines. They will be able to tell about it in more detail in next concall. Though they hinted that this plant should start contributing starting q1-q2 2018.

7.Incremental net contribution on selling of Dye Stuff versus Intermediates - 10%

8.Tax gains from MAT starting q4. 11% gains… from 33% to 22%…big bottomline booster.

9.Revenue for Q4 will be between 95-105 cr. (around 100 cr).

10.Confident of maintaining 25%+ CAGR growth next year. Margins around 17%.

Overall, mgmt sounded very bullish. Said key to business is stable business model, which these guys do have imho. Very forthcoming mgmt. Pleasure to hear Mr. Makharia answering the questions.


(Changu Mangu) #22

Update: The new H-acid plant has started trial production with commercial production due to begin shortly.
http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/1dc50bbe-77bc-4d2a-8d89-63cd1cd19ca1.pdf


(Nabendu) #23

Anuj: Any other theme that you are backing right now? We spoke about sugar. But anything else where investors can look for a fresh trade or a fresh breakout?

A: Let me give you the latest development on the dye intermediate front which has been happening in China because if you see China has implemented the strengthened pollution control norms and minister who is in charge of this is taking a daily view on the pollution controls because the dye intermediates companies seem to be a big headache for the Chinese government. And if you see they have a strong presence and actually of this, whatever the ground report I have that the two plants have already closed and the daily monitoring of the Chinese government on this pollution control has seen the prices of vinyl sulphone rising from Rs 225 to Rs 275 and from H-acid from Rs 325 to Rs 375 in India in this last one week. That means both the prices have risen by about Rs 50. That means a rise of about 20 percent and 23-24 percent.

So the dye intermediate makers, those who are making vinyl sulphone and H-acid in India, they will stand to gain because if you talk to these industry guys, they are expecting that the situation is going to worsen on the Chinese front and because of the curtailment of the production, the dye makers will be requiring this dye intermediates globally because dye if you see overseas or in the global market, March is seeing the robust demand. And because of that the dye intermediates like vinyl sulphone and H-acid both have a very huge demand. So I am quite positive on these stocks, those who are making vinyl sulphone and H-acid and prominent amongst them are AksharChem, Bhageria Industries, Bodal Chemicals and Kiri Industries.


(ramanhp) #24

Can some help me with the current valuations of Shree Pushkar? I am positive about SP for near future and long term. But don’t know how to value it at CMP. At 186(around), is SP richly valued and all capacity expansions already priced in?

Can you please anyone guide this?
Disc: Interested to buy for next 3-4 years.


(Changu Mangu) #25

It’s quite simple really.

FY 2015-2016: Revenue was 248 Cr: Profit: 22Cr | EPS: 7.38 | PE: 18.23 | Price of Stock: 134.48
FY 2016-2017: Revenue will be 320 Cr: Profit: 28.52Cr | EPS: 9.44 | PE: 20.78 | Price of Stock: 196.07
FY 2017-2018: Revenue will be “minimum” 400 Cr Profit: 36.79Cr | EPS: 12.17 | PE: 20.78 | Price of Stock: 252.95. That would be a solid 25% upside from current levels. So margin of safety in case PE falls. Lower chance of losing money. That is quite comforting.
Edit Typo-FY 2018-2019: Revenue will depend on success in foray into textile chemicals (land has been procured already) and also minor CAPEX in existing plants. Will revisit the expected sales at start of FY 2018-2019.


(ramanhp) #26

Thanks for putting it out so simply. Helps to me to value the company in future. I just have one question here. How do you take account the international price fluctuations for its products ?


(Changu Mangu) #27

Welcome.
Here’s something more…
FY 2017-2018: Revenue will be “minimum” 400 Cr Profit: 43.52Cr | EPS: 14.40 | PE: 20.78 | Price of Stock: 299.19
Profit will increase as tax will decrease from 38% to 22%.

Don’t think about the price fluctuations. It’s like a SIP :slight_smile: The averages will make it right. Neither very high, nor very low prices will sustain for a long time. They will get the average selling price for the next 365 days.


(ramanhp) #28

Sounds very optimistic. I guess their foray into textile chemicals can be an interesting turn of affairs.


(Changu Mangu) #29

Not very optimistic actually :slight_smile: I have omitted mentioning some more triggers as who knows about delays. I would actually expect 2017-2018 to be 450 Crores in revenue. One example is that I have not accounted for the additional 3000 MTPA of Dyestuff plant that will be online in Q1 2017-2018 with decent capacity realization from Q2. Second thing is there is no contribution of H-Acid new plant in Q4 2016-2017. That will also contribute although quite a bit of it might be captive consumption. Not adding to calculations as not sure how much will be sold to customers.

If Q4 2016-2017 we can expect revenue of 100 Cr then what should be revenue with 2-3 quarter contribution of additional 3000 MTPA of Dyestuff next year?

You will find that the maths is quite compelling.


(ragav) #30

Shree pushkar chemicals Resuls March 2017 and Yesr end

Sales comes at 31182 vs 24774 a growth of near 25% YOY sales growth vs Receivables is 25 % and 41 % there’s something to be seen here .

Short term borrowing comes down and Lont term borrowing shoots up from 7 laks to 51.49 laks not sure why they have increased debt and so in line with Imcrease in the Finance cost .

Additional working capital of 2157 is been used this year to bring in sales of 31183 , The Sales to W cap ratio is 5.54 in 16 Fy and 5.16 Cy 17 so not much spectacular work with additional Working capital …

Long term provisions gone up 100 % have to keep a eye on the provisions .

Roe improves by 200 basis points to 15 % but with debt , 52 lakhs is negligible overall but sudden jump from a mere nothing raises eyebrows …

Net margins have slightly improved from 9 % to 9.77 % a 77 basis points move .

Disc : Invested , Source : BSE announcements .


(chets) #31

Result update:

  1. Q4 revenue at 93 crores. This is very close to the management estimate of 95-105 crores.
  2. Yearly EPS at 10.09. This is lower than expectation. Should have been closer to 12.
  3. Non current liabilities are double of last year. Primarily due to deferred tax.
  4. Trade receivables are up by 35%
  5. Dividend declaration of 1.5 rupees.

Would wait for management conf call to get more clarity.


(chikspat) #32

Hi,

Last con call management said we should be falling in MAT, but in this quarter result nothing has mentioned. Needs to clarify in con call. If still that approx. 1 cr. tax credit get back than EPS will be 3.0. But looks like long term story.


(Changu Mangu) #33

Did anyone attend the conference call today? Some updates would be wonderful. Best


(chets) #34

Typed the notes in a hurry, so there may be errors. Hence kindly wait for the conf call transcript which they upload on BSE:

  1. Confident of maintaining growth of 30% in 2018.
  2. EBIDTA for FY17 was 17.4 as compared to 13% last year. Confident of maintaining/improving the margins for FY18.
  3. Tax rate was 32-33% in 2017. Expect the same tax rate in FY18.
  4. New capacities for Dyestuff, SOP etc, coming online in 2018 will add to volume growth. Total CAPEX planned 15 Crores.
  5. Chinese threat not a concern as focus is to build a sustainable business model.
  6. Textile Chemical updates to be shared in Q1 FY18.
  7. GST to be positive for the company. However details to be worked out.
  8. Expecting exports to move up to double digits from current 7-8%
  9. 40% of the increased receivables are from party against which legal action is ongoing.
  10. In final stages of getting Blue Sign (not sure of this name) certification which will add credibility to win new clients abroad.
  11. Further exciting expansions plans for FY19-20 to be unveiled by Q3 FY18.

As usual Management sounded confident and focused on creating new opportunities by full forward and backward integration in textile dyes intermediate/dyestuff segment with complete environmental compliance.


(Changu Mangu) #35

Thank you Chets. Most appreciated and well captured. :pray:


(Changu Mangu) #36

Chets. Did some checking. The links below explain BlueSign. Basically it seems it will help win orders from export customers who insist on this compliance. Also, this is not a company certification but a product certification for each product that SP would like to have covered with the BlueSign.
This seems to be the now accepted gold standard for getting product orders from high compliance markets especially as they go further into the textile chemicals business.
SP already has a fully “zero waste” model. The BlueSign certification should add to it as much as being a zero waste company adds to their credibility.


http://business-ethics.com/2012/11/11/what-is-the-bluesign-standard-for-textiles/


(chikspat) #37

Hi,

Any mention of MAT credit in this con call?


(chets) #38

Good work @valuestudent
Once they acquire Bluesign for their products, it would be easier to win new clients(especially out of India).
The management is slowly moving away from a dye intermediates firm to a one stop shop for dyestuff and textile chemicals. Both of these are higher margin products and the future looks bright.

@chikspat not sure if they spoke about MAT credit. I was doing some other work while attending the call and may have missed it.


(Changu Mangu) #39

Chets and @chikspat I just heard the conf call and no one asked clearly on the MAT. It was only asked in passing as to the tax guidance being the same going forward and the answer was a yes. I was also wondering why the MAT effect is not a point for being discussed by anyone on the call. The rest of the call was quite positive and looks like the management knows what they are doing without taking on any debt of any major consequence. That is my positive on this company as well. They are constantly looking at growth and there is no debt being used to fund it, it is purely accrual based. That places the company in a safer place for me. Growth + No Debt to Grow. The stories usually have always gone wrong when debt or acquisitions via debt has been in play for achieving growth. This seems like a good story.


(chikspat) #40

Thanks chets and valuestuden,

As no body ask and management not discuss about MAT, I assume they did not get any credit. Generally promoters will not let issue unattended if there is something positive. This is natural. As you said, guidance from management, where they will release new plans in Q3 is good and bad. Good in the way, we get answer what is next after FY2018. Bad in the sense if they will not able to execute plan, price will be punished. I do fill 20 P/E where company suppose to grow 30%, still much value left. Open for more views.

Holding positions from last year.