Bhansali Engineering Polymers - An Import Substitution Story!

Stock Opportunities Not-so-Hidden Gems
601

thank you!

I agree crude may have played a role, but i think another reason for improved earnings was capex completed in 2015 from 48,000 tpa to 80,000 tpa and the JV with Nippon which led to improving product mix. Specialty grade abs used in the auto sector earns higher margins, which started around that time.

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602

I would like to share material selection process from my work experience(automotive). New producers will have high entry barrier.

  1. the one material we used 15 years back, still we use it today for same application and products. Finding one material to fulfill all critieria’s of automobile industry is not easy and time and cost consuming process. Sometimes we pay premium as we dont consider competitor suppliers at all.
  2. OEM does not approve any material catogorically. It is a duty of tier 1 suppliers. Tier 1 suppliers dont take any risk as time pressure is too high.
  3. Even slight change in quality will have huge impact on finishing. Ex. painting of injected parts.
  4. Localisation is very important. But 80% of the time, localisation effort will lead to failure based on quality and mechanical properties requirement.
  5. Material manufacturing process is highly sensitive based on ingredients. Even there will be issues in quality from same supplier if materials are produced in 2 different locations.
  6. Above issues are same for consumer industries as well like body of water heater or washing machine door.
  7. Another example is lego. Process and tools are optimised for one material. No change is allowed.

So regarding the discussion about kingfa,

  1. I dont see any risk about new entrants especially in automobile industry.
  2. Material approval process is time consuming.
  3. Cost advantage can play a role in other industries. Ex.: Mixie Jar cap.As consumer, i would say all our so called top house hold appliance companies are producing very substandard products in terms of quality.
  4. No possibility to change suppliers as per wish untill one product cycle completes.
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603

I agree with all your observation. However, I would like to add that one of the major strengths of the company is that it is debt free- so it can comfortably absorb major external stress. Further, its installed capacity is significantly more than current/anticipated demand in near future - so no need for additional Capex.

Therefore, its profitability should jump when demand normalises/increases.

Disc: major investment since couple of years. Still holding and hoping for a turnaround.

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604

Yes that’s very true. The strong Balance sheet of the company is going to help tremendously during these uncertain earnings.

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Q4 FY20 results of the company are not good. Company has negative growth in both sales and margin. One very interest thing was to see negative employee cost for the quarter. The Managing Director and Executive Director have decided to forgo the Remuneration earned in the form of Commission, for the current fiscal calculated on the profits of the Company. As a result, Commission of Rs 593.48 lakhs provided in earlier quarters has been reversed and no provision has been made during the current quarter, thereby resulting In negative figure under the head Employee Benefits Expense. Very rare to see such things in small companies.

Regards
Harshit Goel

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606

Q4 results are in line with most auto sector and consumer durables companies (or the broader economy in general). It’s safe to assume that the company had only 2.5 months of “normal” operations in Q4 since by mid March most factories had begun reducing shifts/workers.

Pleasantly surprised to see management has forgone commissions. Shows that they care about the company and minority shareholders beyond just rupees and paise.

607

What’s the reason for increase in inventory? Do lower crude prices benefit Bhansali due to lower cost of raw material or does it negatively impact its realizations leading to lower revenues?

608

In one of the previous year’s AGMs, Mr. Bhansali had said that crude prices don’t affect the company as much as currency fluctuations. So I don’t think that will be such a big factor. Since it’s a B2B company, any gain from lower crude would have to be passed on to customers because ABS and SAN prices would also come down.

As for the increase in inventory it could be due to the slowdown of the economy or maybe because a couple of weeks of Q4 had less demand due to the lockdown. No clarity on that as yet.

609

I believe that was in response to impact of rising crude prices to which the management mentioned most of it is hedged and hence doesn’t impact the company much

The inventory was at similar levels as of Sept 2019, hence Q4 slowdown doesn’t seem to be the reason for build up in inventory

610

Hi there,
I am new here so please correct me if I am wrong in my analysis here.
Fundamentals (specially top-line growth, ROCE, debtor days and even expansion plans) prima facie looked amazing for Bhansali on screener.
I checked out historical share price to find out massive 10x run up (in 2017 and early 2018) and down back to historical levels (share was trading at 40 levels in 2010 and back to same levels in 2020 !!). This intrigued me to core, so I spend about 3 hours yesterday reading this entire thread of 540+ msgs and found this one particular analysis which focuses on shareholding pattern by @phreakv6 super helpful. (Bhansali Engineering Polymers - An Import Substitution Story!)

I think it’s very evident that this was a classic case of typical pump and dump stock.
I don’t think one should spend more time analyzing this stock even if this looks superb on several parameters. These promoters are just waiting for the next 2017 type of mad bull run and they will again announce crazy expansion plans to drive their stock.

Disc. - Not invested, views may be biased. #newtoVP

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611

Does anyone know when the anti-dumping duty will be lifted for the products BEPL produces?

613

I have no info. on the AGM , others can comment but i have an interesting observation on technicals …If you look at the daily charts of BEPL , you will notice that a classic Flag-pole chart pattern is emerging and as per that my short term target for this stock is around Rs.83 and thereafter the market overall and intrinsic developments of the stock can either take it higher or lower …but clearly 45 low on 14th aug & 64 highest on 21st aug of the pole and then a sideways flag ,out of which its now emerging …with a tgt of 83 in the short term !

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Excellent result by the company in Q2. Net profit of 36 crores, highest in company history.
BEPL Q2FY21 results.pdf (3.8 MB)

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Bumper Q3 :point_down:
Revenue increased by 58% YoY
PAT : 6.5% to 33% YoY & 11.3% to 33% QonQ

…BEPL Q3FY21 results.pdf (935.7 KB)

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Promoter holding has increased compared to last year from 55 to 56.45…

620

Can anyone please tell me how to track the ABS prices?
Till now, I used to make a free account on Indianpetrochem.com however they only give free access for 5 days.
Thanks!

621

I think your approach to track ABS price will not result much yield.Reason is out of the 3 chemical some of them is linked to crude.Acrylonitrile is mostly imported from USA. Hurricane season in USA east cost influence price.Other 2 , Butadine and Styrene either brings into India from China, south east asia or surced locally.large Plant closure in China also impact price for Bhansali.Finished ABS also imported to India from Korea,China, some time dampens the domestic ABS price. On top of this there is 100s of grade and color for ABS.
Having said that Only time Bhansali will get good price for its product when Auto sector and white goods have good demand, it can sell good amount Premium quality ABS.

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Noble gesture by a Noble Man :point_down: :pray:

Press Release.pdf (1.5 MB)

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[Linking Post] BEPL’s chart posted on technical analysis thread.

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