Clariant c

Stock Opportunities
1

Hi,

This is my first post on Valuepickr.com and I should say I am really impressed by professionals likeDonald/ Ayush/ Mahesh/ Hitesh/ Somani, etc and want to thank you all for your contribution on picks like PI Ind, Jubliant Ind, Mayur Uni.

I recently read about the chemicals sector and one pick I found interesting is Clariant Chemicals India.

Clariant Chemicals (India) Limited is one of India’s leading specialty chemicals companiesand (As claimed by company )is the No. 1 player in

  • Pigments
  • Textile Chemicals
  • Leather Chemicals
  • Biocides for Paints

Clariant’s complete business includeTextile Chemicals, Leather Services, Paper Specialties, Pigments (Coatings, Printing and Plastics and Special Applications), Additives, Emulsions, Industrial & Consumer Specialties, Detergents & Intermediates, Oil & Mining Services and Masterbatches.

Reasons which attracted me to this business

  1. Established market leader inspecialtychemicals

  2. MNC available at 6 PE

  3. Zero debt and cash on books

  4. NPM, ROC, EPS consistently increasing over the last 5 years.

  5. Dividend yield of 4.5%

  6. Parent company shares the latest technology

  7. Corrected 10% due to bad quarter results.

  8. Dalal Street has been recommending it every now and then since 2 years.

Attached are the annual reports and presentation.

Corporate presentation: http://www.scribd.com/doc/72188808

Annual Report:http://www.scribd.com/doc/72188956

Annual Report:http://www.scribd.com/doc/72189013

I have gone through the last 2 years annual reports and the latest investor presentation, but couldn’t find any DATA. By data, I mean no clear idea about

  1. what is their market share?

  2. who are their competitors?

  3. what is their moat?

  4. Why is the dip in recent quarter results?

  5. Guidance

It would be great if you guystalk to the management and get complete details about the company.

Note: Historically, this has always traded at low valuations 4x-10x. Is it because of the sector being given a low PE rating? I guess so, as I find no other reason how an MNC which is a market leader with great div. is available at 6 PE.

Regards,

Sandeep

2

One more point that needs to be investigated is can it be termed as a purelycommoditybusiness? If so, where are we on the demand-supply cycle.

I think this stock is kinda mix of stocks likeLubrizol (Lubricant additives)+ Camlin fine sciences (AntiOxidants) + Vivimed Labs (Personal Care).

Does it also produce same or some of the chemicals which Buffet’s Lubrizol produce? If so, what are their global shares?

I see a huge potential for this segment and in fact became quite confident after Buffet bought Lubrizol.

Thanks,

Sandeep

3

check your numbers…exceptional items make it look cheap…its throwing out most of its cashflow in dividends and yield may put a floor to the stock…nothing exciting about a slow growth business…

you have no idea on their business but see ‘huge potential’…suggest you wipe the fog off your glasses…

-P

4

Hi Pradeep,

Thanks for your valuable inputs. I am a newbie in investing, hence wanted you guys who are experienced to check the financials and other details.

Coming to the fundamentals of business,specialtychemicals biz is ALWAYS a proxy play. Coming to thefinancials of the biz, I agree to your comment that if the company pays most of the profits in dividend, it willdefinitelybe a slow-grower.

)- Sandeep

5

This link (bit old) but has lots of info… I like TIP’s strategy and picks (May be my bias)

http://www.tipblog.in/analysis/clariant-chemical-ltd-–-good-company-for-long-term-portfolio/

6

Thanks for the link Raju.

7

Another company in the same sector is Atul Ltd. This company is run by Lalbhai group (Arvind). Company has good land bank also and is recently beaten down from 22 levels to 170. Have n’t done a detailed study but looks a good buy now.

8

Hi,

Interesting info from Neeraj Marathe

http://neerajmarathe.blogspot.in/2013/04/clariant-chemicals-sale-of-business-no.html