Great results for this Q
Anyone recently tracking and has any updates on this.
I have seen couple of post regarding bad management and governance, but fundamentally company has been doing all the good things. Seems weird things are not reflecting on price.
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Everything material to this company going forward is summarised in the below pic. If everything turned out the way it is mentioned below, I think it will be an exciting opportunity looking at the growth triggers, current valuations and prospects. However, I would say that I am not a big fan of this company’s capital allocation decisions, business operations related decisions in the past.
Disc. Invested with a tracking position and adding gradually.
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| - | Dye intermediates have seen a subdued performance because of volatile consumption of end-user industries. Destocking of inventories is also going on. They are being imported to India from China. |
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| - | Caustic Soda business has done very well. Technology upgradation at Rajpura Unit has been completed so demand for Caustic Soda will be addressed at better efficiency with lower costs. |
| - | Power, fuel & Logistics costs have increased. |
| - | Part of the construction activity has been delayed due to prolong monsoon and labor shortage in the previous two quarter. Our Saykha Greenfield Project is expected to start trial run of Benzene Derivatives in Q2FY24. Once this new site is stabilized, we will start the trial run of Sulphuric Acid by Q4FY24. As a part of the project review, product MPDSA, PNA, 2,4 DNCB is kept on hold. |
| - | Subsidiaries have not been performing well due to weak macroeconomic environment. |
| - | Global MNCs have started sourcing from India to de-risk their supply chain. Power crisis in Europe has started to give immense opportunity to India to gain wallet share in the market. |
| - | 3 strategic objectives: grow existing capacity, increase export business & finish Saykha project. |
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Source: https://www.bseindia.com/xml-data/corpfiling/AttachLive/11c9ab50-5534-49b0-a134-04d15df224cd.pdf
New Projects of Specialty Benzene downstream products having capacity of 63,000 MTPA at Village
Saykha, Near Dahej, Gujarat. ( Company did 400 Cr capex for this Green field plant )
Company Expect 320 cr Revenue with EBITDA MARGIN 12 - 15%
Disclosure: Not invested
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The margins for dye chemicals and dye intermediates may have reached their lowest point. Bodal Chemicals’ margins are also currently at their lowest in the past five years but have started to improve, due to falling raw material costs. Recently, the company has seen an increase in volume for both domestic and export markets. Revenue is expected to go further up from benzene derivatives, and the management is optimistic about further margin improvements. With expansion projects now completed, no additional capital expenditure expected, and decreasing debt levels, the company might turnaround.
The concall summary from Nov,24:
Achieved ₹858 crore in revenue for H1 FY25, a 27% YoY increase. Growth was driven by volume improvements, particularly in dye intermediates (48% YoY growth).
- Dye Intermediates: ₹327 crore revenue (48% YoY growth).
- Dyestuff: ₹259 crore revenue (14% YoY growth).
- Basic Chemicals: ₹44 crore revenue (7% decline).
- Chlor-Alkali: ₹155 crore revenue (20% YoY growth).
Benzene Derivatives contributed minimally in Q2 but is expected to ramp up from Q4 FY25 with certifications pending for pharma-grade products.
Management anticipates significant contributions from the benzene derivatives project and recovery in other segments, projecting improved EBITDA margins of 12-13% in FY26.
Disclosure: invested, no trade in last 30 days
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Very well said. I have the same opinion
why it takes almost 1 year to get registration from pharma company to provide them benezene product. Commercial production in Sakhya plant started almost 1 year ago.
And what about management integrity and capability. Previous post of valuepicker had highlighted the same.
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Bodal Chemicals looks like a solid opportunity at these levels, with improving results after a tough 2.5 years and bottom-of-the-cycle valuations:
10-Year Valuation Chart (Enterprise Value/Sales)
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2014-2019: Period of supernormal profits. 17%-20% operating margin (beneficiary of China pollution crackdown) and stock traded at an average Enterprise Value/Sales of 1.5x (reaching 2.5x at the peak).
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2020-2025: Challenging phase. Margins dipped to 8%-11% and valuation de-rated to 1x-1.2x.
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Looking at the quarterly revenue trajectory, management’s guidance of Rs. 2000 crore over next few quarters looks easily doable.
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If operating margins move to 12%-15% as indicated this quarter, Bodal should trade at 1.2x-1.4x EV/Sales in line with past cycles.
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This means a potential EV of Rs. 2400-2800 crores. Rs. 200 crores debt reduction expected, so Rs. 650 crores debt. Potential Market cap: Rs. 1700 crores-2100 crores.
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Overall an upside of 2x-3x with low downside risk?
On Concerns about this Company
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Smallcap company: Governance has to be seen accordingly?
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QIP at the peak: Expansion plan was to be funded by debt and internal accruals, yet company did QIP? Why? Given the level of over-valuation at the peak in 2017, promoters used it to their advantage and raised funds cheap. A smart move from their perspective and a bearish signal for us as investors?
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Issuing warrants/buying from the market a few months later: Stock corrected 30%-40% and the promoters bought..which continued every time there was a correction. Warrant pricing is as per standard formula prescribed by SEBI..looks fine to me..
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On execution - Tough times for the entire sector; not just Bodal but all players have been struggling?
Do share your thoughts.
PS: Initiated a position
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