Valiant organics is a specialty chemicals player. It manufactures and markets 'Chlorophenols'. -Chlorophenols are divided into 2 categories; Mono-chlorophenols (Ortho-chlorophenol and para-chlorophenol) and Di-chlorophenols (2,4 & 2,6). Domestic sales are 56% while exports are at 44%. The promoter is Mr. Hemchand Gala. Some of the directors are closely associated with Aarti Industries.
1. The demand for this product far exceeds supply. Which is why the company is expanding capacity from 4800mt to 21600mt in a phased manner over a 3 year period. Current capacity utilisation is close to 100%.
2. Valiant would become the market leader in India with the enhanced capacity.
3. The financials appear to be very decent. 5 year PAT CAGR is about 27%, average 5 year ROCE is about 32%, and the ROCE last year is about 50%. The company is debt free, and the payout in 2016 (as per screener.in) is about 70%
4. The manufacturing facility is fully integrated with almost no dependance on outside factors. The raw materials Chorine gas and phenol are readily available. The location is about 180Km from Mumbai's Nhava Sheva port
5. The product has uses in multiple industries - Agrochemicals, pharmaceuticals, dyes, cosmetic and veterinary drugs
6. The company has the ability to customise its offerings and it even charges a premium for this.
7. Expansion strategy is to set up a sales and marketing team and to enter new geographies with their existing portfolio. Apparently there a very few players worldwide too
1. Competition is primarily only from Chinese players. More information is needed to understand the threats posed and whether Valiant's customization, locational advantage, long term relationships etc translates into repeated business and/or some pricing power. As of now the high ROCE provides some solace
2. High customer concentration risk - 75% business from top 10 customers and high supplier concentration risk - 78% business from top 10 suppliers. However this trend seems to be improving every year
3. No idea about product substitutes, longevity etc
4. Very low volumes, restriction on purchase quantity
Since it is a newly listed company and very tiny company, we don't have much information. It will be great if we can collaborate and do some more digging
Disclosure: Tracking position