Chemcon Speciality Chemicals - Red herring or True Value

Q4 Management comments.Q4 Management comments…pdf (947.9 KB)

August con call 2021

India is a net importer of HMDS and CMIC. Chemcon is the largest manufacturer of both the products in volumetric terms.
Chemcon is an import substitute
With a backward integration to reduce import of raw materials and a capex of 41crores in line to plant 8 and plant 9( p8 and p9), the company forsees sales of 120-160crores.
New products in the pipeline and new applications to the existing products. The company hopes to do better and supply to the U.S.

On the flip side
Chemcon sells its products per kg basis as per the conference call leaving the customer to negotiate on placing large quantities.
The realization of profits will not be in line with increasing sales. There will be flexibility in profits.
Why shouldn’t it be consistent profits with higher sales?

Just studying the company.
little disappointed

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Bumpy ride continues… Co received communication from Gujarat Pollution Control Board, directing closure of plant. They have suggested that they plan to make a representation to GPCB on this.

Disclosure: Not invested, do not plan to invest.

It’s probably the dark horse of Chemical players. Valuations seem reasonable given the growth triggers are going to come in during H2.

  • 1200 tons of CMIC production goes into trial run from next qtr and commercial production from Jan 2022.
  • P10 coming online during 2023
  • Business is targetting 100 crores of profitability by FY 23.

Execution has been hampered by a lot of events. If they execute as plan story should start playing out from Q4’22.

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Could anyone explain what is happening with this stock(Stock hit lifetime low as I am writing this post) ? Recent performance of stock seems bearish compared to other lister peers in same space.

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YoY revenue was same but volume of products were reduced by 20%…this may be reason

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Thanks for your response :slightly_smiling_face: @Krishna_Kumar
Does this mean non core income or other income is more than previous quarters?

Seems because of higher price…

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Management in the latest concall about 3x price rise of HMDS

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@aman Yes, I read this in their concall transcript. Along with this, there were lot of positives on upcoming quarters. Meantime, Stock was going south :smile: Hope upcoming quarters will be better

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I think profits are directly linked to volumes, so any price increase or decrease shouldn’t affect much the bottom line.
Volume need to increase, otherwise backward integration can increase bottom line in the future.

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Ya I know, they mentioned this in their previous concall. However I was not able to understand the attached statement of the management.
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What management is saying here is, their profits are not tied up to revenue,
revenue can increase or decrease with end product realization changes(commodity nature).
They charge per KG or per Ton basis,
consider below ,
Suppose they sell HMDS at 100 per KG and margin is 20 per KG, now after few days HMDS prices increased in market place, it now sells at 200 per KG but their margin is still 20 per KG.
So irrespective of increase or decrease of market prices of HMDS, they earn 20 per KG.
So in case of this company always check volumes and not revenue.

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did anyone attend the agm. If yes will be great if can share the notes

All this land purchase is related party transactions

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Chemcon chemicals has given a bad performance in quarter Q2FY23, bith YOY and QOQ. Sales, net profit, Ebita, Ebita margins are all down in the current quarter significantly. In investor presentation, they have mentioned that this is attributed to soft demand from Pharma companies during this quarter. While they are aptly diversifying into other value products, and expansion is on track, it is not possible to understand whether the impact on sales and margins will continue in the coming quarters as well or the demand is likely to improve going forward. Promoters have to come clean on these issues to maintain the fair corporate governance rather than simply keepin patting their back for aggressive expansions that they are boasting off.