Thirumalai Chemicals - A chemical Company

(Rajeev Jawahar) #111

The Thirumalai stock has taken a beating in the last couple of months or so, primarily because of the removal of anti dumping duty on PAN which also hurt the sentiment towards the stock in an already troubled market.

What is interesting to note is that bulk of PAN imported into the country was in any case coming without the anti dumping duty being imposed on it. This is also visible from the prices of PAN over the last 6 months or so. The PAN price (Retail) ex Mumbai as of today is Rs. 87 per kg, which was about the same in March 2018. Of course, it has fluctuated in the interim in a range of Rs. 80 to 90 per kg. The point being that there is negligible impact on pricing, if any at all after the removal of anti dumping duty.

Another interesting observation is that during Q3 of last year when the Co. came out with its best ever quarter, the PAN prices ex Mumbai fluctuated between Rs. 68 to Rs. 80 per kg. The input costs have also gone up in the interim, but the larger point being that perhaps the current share price correction is more news driven that the actual changes on the ground. However, the picture should get clearer when the Co. announces its September qtr. results in a few days.

(Aditya Iyer) #112


Requesting you to share a source through which we can track PAN prices?

Can we track PAN prices online?

(EL) #113

I am invested as well

With crude prices high, what is the likely effect on them going to be

Last quarter their factory was closed for a period

Please find prices of all chemicals over the period, this was uploaded in another thread on this forum so credit goes to that thread… I have since updated it and for ease the colour changes when price of any commodity changes

CommodityPrices.xlsx (146.6 KB)

(shanid) #114

ADD withdrawal on PAN is a structural issue on the industry,we will not be able to analyze any impact in just one month time duration.

It will take some time for the importers to identify the opportunity if any and act accordingly.

We should also consider the fact that both Thirumalai and IG petro expanding their capacities,post commissioning of dahej plant operatinal expense of Thirumalai will shoot up and any adverse scenario on demand and product price may take a toll on the numbers.

(rupaniamit) #115

Margins little under pressure but mostly intact. Overall decent set of numbers for Q2FY19.


(kush_gangar) #116

Dahej would be a very good expansion for Thirumalai as it will significantly lead to reduction of logistics costs for them (current plant is 1300 kms far away from suppliers and customers). This will help them in facing any competition from cheap imports as they will have the flexibility to reduce prices by 10-15% and still maintain margins due to logistics cost savings.

(kush_gangar) #117

They have added 30 Cr in FA and 110 Cr in C-WIP. This 140 Cr investment in new plant should lead to 700-800 Cr of revenues over the next 2 years considering current fixed asset turnover ratio. Also, in H1’19, the company has generated significant cash which can be seen from their current investments which have increased from 15 Cr in March to 100 Cr currently

(Ayush Mittal) #118

Pretty good nos! Overhang of withdrawal of ADD and concern on reduction of spread is perhaps what keeping the PE low. Any clarity from the management on these two points would be very helpful.

(phreak) #119

I was just going through the ADD - Final finding document from Sept 2018 where anti-dumping duty was removed and some of the observations I found interesting.

  1. “The basic custom duty on import of Orthoxylene has become ZERO in 2018 and all other taxes levied on its import are creditable. There is no advantage from tax perspective to the DI for exporting the subject goods, yet it is exporting the subject goods at a price lower than domestic selling price to create shortage in India and charge high price in domestic market.”

  2. "The number of producers has come down from 5 at the time of initial imposition of duties to effectively 2 now, leading to monopolistic position of Page 24 of 48 the two petitioners. The DI realized very high prices and has been unaffected by the landed prices of the product under consideration. Continuation of antidumping duty will only encourage the cartelization practices and excessive profiteering by further misuse of AD duties by the DI.

  3. “The prices of raw material, OX, have decreased internationally by 50% in September 2017 as compared to October 2013; whereas Phthalic Anhydride prices, has decreased only by 25%. The delta for Phthalic Anhydride has gone up and thus, this industry does not require continuance of anti-dumping duty.”

I think this is the reason why the stock is trading so cheap. The regulatory body is claiming that IG Petro and Thirumalai are profiting unfairly by exporting at cheaper prices than they sell domestically because they have beneficial RM cost and are also abusing their duopoly position.

This is PA imports into India. The imports have been increasing by volume even when ADD was in place which means that TCL and IG Petro have been selling at similar or higher prices domestically.

While exporting some at similar (cheap) prices abroad.

I am not sure from what date ADD will be removed - will it be from September when the verdict came out or from December 2018 when last year’s ruling expires. I think that’s when we will be able to see the impact in the numbers. I think when ADD is removed, import volumes will go up as prices drop and domestically TCL and IG Petro will lose their ability to price higher which should lead to some volume drop in domestic sales - sort of a double whammy. If they have long-term contracts, we may not see the effects for sometime. However, the silver lining is that margins will improve if crude stays under $60. This is why I was interested but looks like the story may not be as simple.

Disc: Just researching

(Venkatesh) #121

Can you share the Sep18 document. And where did you get the import prices of PAN. Same report?

@RajeevJ any views on this. Do you still hold the stock or have you exited?

Not holding. But interested

(Rajeev Jawahar) #122

Attaching the Final Finding order of 13th September pertaining to removal of anti dumping duty. I think its effective sometime this month.

Thirumalai-Final_Finding.pdf (907.5 KB)

Meanwhile the price of PAN has been gradually declining in line with the decline with the price of crude over the last three months or so. This declining trend has been seen across all crude based products in the chemical sector. This price correction may have been partly accentuated due the removal of the anti dumping duty, but I am not sure if that is the case. The price has fallen from a high of Rs. 92 per Kg (Ex Mumbai) in early September to Rs. 76.50 today. This price has been steady at Rs. 75 per kg since November 22. Interestingly, as mentioned earlier on this thread, the PAN price was quoting around Rs. 68 a year ago when the Co. perhaps came out with its best ever quarterly results. Further, crude today is quoting substantially lower to what it was quoting then.

The price of the Thirumalai stock has however seen a steady decline over the last few months, so perhaps I may be missing something! I continue to hold my position till clarity emerges. The Dahej plant could potentially be a game changer going forward, but there is no denying that the share price decline has been disconcerting!

(Pranshinv) #123

Phthalic Anhydride consumption in India is dominated by the Plasticizers sector. In 2017, plasticizers accounted for a share of 74.3% due to growing demand for polyvinyl chloride, PVC, in the construction industry and automotive industries, according to GlobalData, a leading data and analytics company.

The company’s report: ‘Phthalic Anhydride Industry Outlook in India to 2022 – Market Size, Company Share, Price Trends, Capacity Forecasts of All Active and Planned Plants’ reveals that Lurgi-BASF PA Technology is the dominant technology used for Phthalic Anhydride production and it accounted for 88.5% of the total installed Phthalic Anhydride capacity of 0.344 million tonnes per annum, mtpa, in the country.

Dayanand Kharade, Petrochemicals Analyst at GlobalData, explained: “Plasticizers contribute largely as end use application of Phthalic Anhydride in India due to growth of the construction and packaging industry. Phthalic Anhydride is also extensively used in the production of phthalate plasticizers for making PVC to a large extent in the automotive and electrical & electronics industries.”

The largest Phthalic Anhydride plants in India in 2017 were ‘IG Petrochemicals Taloja Phthalic Anhydride Plant’, ‘Thirumalai Chemicals Ranipet Phthalic Anhydride Plant’, ‘Asian Paints Ankleshwar Phthalic Anhydride Plant’ and ‘SI Group India Navi Mumbai Phthalic Anhydride Plant’.

The major companies in the country are Asian Paints Ltd, I G Petrochemicals Ltd, PPG Industries Inc, SI Group-India Ltd and Thirumalai Chemicals Limited. In 2017, together these companies accounted for 100% of the Phthalic Anhydride capacity in India.

The main sectors that consume Phthalic Anhydride in India are Plasticizers, Alkyd Resins and Unsaturated Polyester Resins, UPR. In 2017, these sectors accounted for almost 96.3% of the Phthalic Anhydride demand in the country.

The average price of Phthalic Anhydride, which was $980.7/ton in 2017, is expected to increase at a compound annual growth rate (CAGR) of 3.2% to $1148.0/ton in 2022.

During 2008 to 2017, India was a net importer of Phthalic Anhydride. Imports as percentage of demand rose from 18.5% in 2008 to 35.6% in 2017. According to GlobalData forecasts, imports as percentage of demand is expected to decrease to 19.2% in 2022.

(bikedi) #124

probably coz the spread has been the lowest in 2 years

PAN (SE ASIA) - OX (INDIA) Spread for last 2 years

Disc : no investment, tracking

(bikedi) #125

bad set of results, on somewhat expected lines…

(phreak) #126

It looks volumes have shrunk while RM prices have gone up going by the flattish topline and drastic reduction in gross margins and operating margins. I don’t think this is attributable to just ADD. It looks like demand has reduced drastically if you see the Nov import data. The derating now makes sense.

(KALARAV) #127

Poor set of numbers, stock will be corrected to 60-70₹.

(rupaniamit) #128

Margins will be volatile given volatility in crude prices, but this quarter margins have been very disappointing. This proves that the business economics are so brutal that even such experienced management can’t protect its margins.

Sales have not dropped drastically. I believe it’s volume has increased with lower realization (if volume were to decline - topline would have plunged by bigger %). This quarter it may have executed raw material of higher cost given higher crude prices. Will have to see how IG Petro numbers pan out.

In such commodity businesses it becomes very critical to monitor quarterly volume and realization numbers. I wish management was more transparent in sharing this info with the investor community. Hence, I hesitate to allocate more than 1-2% of portfolio in such businesses.


(kush_gangar) #129


The MD says there was a demand shock (“There was a panic in the market all over Asia. People just sat on their hands and stopped buying for about a month and a half.”) due to sharp crude price fall in early Q3. It is an interesting question whether this demand shock was captured in any financial news reports. Is it a usual dynamic of the chemical industry? Another question is which companies within the Indian chemical industry were affected.

Disc: No holding.

(rupaniamit) #131

Management providing update on FY19Q3 performance and ongoing projects update
FY19Q3_Thirumalai Earnings Update.pdf (256.9 KB)