Sometime back invested in Transpek. Brief write up on the same. Most of the details are covered in this thread.
There has been steep run up in the stock and valuations are pretty high at this point of time.
Transpek industries was started in 1955 as transparent acrylic sheet provider (Transpek). Since then it became one of the leading provider of chemicals specializing in chlorides and sulphers. These are widely used in textiles pharma agrochem and speciality polymers.
Sales have been growing at 16% CAGR for last 4 years. Exports grown at 19% CAGR.
Chloride sales at 19% CAGR.
Working capital has been stable at 80-85 days for last 4 years.
Change in strategy:
Company has been leader in Thionyl Chloride till 2012. Thionyl chloride was predominantly used in endosuflan and dyes and chemicals. Endosulfan was banned in 2012. This caused some degrowth/loss in 2012. Since, then company has been more focused on acid chlorides. As per the latest EC report, company in reducing capacity in Thionyl chloride.
End user industry details
The acid chloride products are supplied to wide variety of end user industries like agrochem, pharma, polymers, surfactants. This protects the company from the end user industry cyclicality. The company has been entering new products in newer industries like they introduced products for flavours and fragnances in 2013 and slowly scaling up with newer products in personal care.
The company also has started supplying agrochem products to reputed MNCs. Transpek also is a reliable supplier to pharma companies.
Transpek has been supplier to polymer and speciality plastic industries since 2005. They have started supplying to most of the aramid manufacturers by 2012. Aramid is a high end polymer which is heat resistant and extremely strong. Aramids are used in specialized applications like military, aerospace components and amor fabric. Newer applications are in automobiles and tyres due to toughness of material. As per some reports, Aramid products current annual sales is 5 bn $ USD and growing at 8%.
Recent announcments and capacity expansion:
Transpek has recently executed a long term supply agreement for 10 years with a new customer. The report mentions about Kevlar which is a Dupont product. This will start in CY2018 and will cause significant increase in sales from CY18. Subsequent to this announcement, company has major capex for 90cr taking capacity from 31000MT to 66000MT.
Environmental clearance reports:
Suggests newer molecules to be supplied for aramid manufacturers.
Isophthaloyl Chloride 4$/kg
Terephthaloyl Chloride 3$/kg
4 –Chloro Butyryl Chloride 10$/kg
Propargyl Chloride 5$/kg
Management/Promoter is the Shroff family who are well reputed and run the excel group of companies mainly in agrochem and chemicals. In the recent buyback by company, promoter did not tender back and hence was able to increase stake to 53%. The promoter have sold excel crop care and Hyderabad chemicals in last few years to Japanese and that would mean increased focus on Transpek. The announced capex is the first one after many years.
1. Promoter group has many companies in similar field.
2. Some of the products may be commodity
3. Susceptibility to raw material price increase
4. Execution risk, cancellation of orders – can take more time with pollution control board
5. Valuations run up
6. Low volumes