Company: Fineotex Chemicals
CMP: 326
Market Cap: 3700 cr
Revenue (FY24): 570cr
EBITDA margin: 26%
5 year average ROE: 25%
Net cash positive company; also recently done fund raise of 342.5cr
P/E: 31x (post dilution from warrant)
- Company is a chemical solutions provider for Textile & cleaning/hygiene segment, basically an specialty chemical company focused in this industry.
- Despite broad slowdown in chemical industry in last 2 years, company has been able to show consistent performance on the back of industry growth and providing innovative solutions. Last 3/5/10 years PAT CAGR is 41%/40%/35%.
- Company has recently raised 342.5cr through pref allotment (which includes 45cr from promoter) in 2 tranches with issue price of 346 & 387 per share (for reference current market price is lower than the price at which shares were issued to promoters / other investors)
- Fund raise is primarily to fund the inorganic opportunity which company is evaluating from last 2-3 quarters (target being in similar segments and of similar margin profile and is based outside of India) - should likely be announced in next 1-2 quarters
- Company currently has capacity of 104,000 tons and is doing CAPEX. In first phase which company is expecting to get live by Q1FY26, it would increase capacity by 18,000 and then will start next phase which should not more than 2 quarters (as land is already in place)
- company has given soft guidance of 28-30% growth for next 3-4 years
- As for all chemical companies, price fluctuation is a risk but company is able to pass on price increase to customers (as also reflected in numbers). Also, not much risk on product / raw material / customer concentration - top 10 product contribute 28% revenue, top 10 raw material dont contribute more than 20% of the total purchase cost, top 10 customers have not more than 30% of revenue
Overall, looks a decent opportunity to bet on the growth/ revival in textile & chemical sector with growth forecast of >25%, ROCE> 25% and available at reasonable valuation
Link of the thread: Fineotex Chemical Limited (FCL)
Transcript of Q2FY25 call: https://www.bseindia.com/xml-data/corpfiling/AttachHis/c8ae6933-ef00-4e1b-a851-5c89ce21d1ea.pdf
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Company: VRL Logistics
CMP: 469
Market Cap: 4100 cr
Revenue (Q3FY25 TTM): 3120cr
EBITDA margin: 16%
5 year average ROE: 19%
Net debt of 460cr
P/E: 31x
- Company is a B2B part-truck load business; Industry is roughly around $9bn but is very fragmented and is mostly into unorganised segment; very few large players with PAN India presence
- Two key drivers for revenue is Volume & Pricing
- Company has fleet of 6100 own trucks & is aggressively adding more trucks; it’s the only company in Industry which has such a large fleet of own trucks; rest all operate on lease model + company has branch network of 1248 branches PAN India, on an average company is looking to add 70-80 branches annually. Both these initiatives will lead to volume growth of 8-10%, slightly above the GDP growth rate as they are gaining market share through systemic shift from unorganised to organised segment
- On pricing front, due to high competitive intensity, Industry was not able to do price hikes, however in Jun’24 company has announced price hikes; this will help hem in operating leverage
- Other than above, Company is doing lot of operational efficiency steps like buying fuel in bulk, route optimization, focussing on hub to spoke vehicle utilization, control on hired vehicles, etc – which would lead to further efficiency
- Company has guided for 12-13% revenue growth with 18% EBITDA margins – together this will lead to 28-30% growth on EBITDA & even larger growth in PAT. Additional as company’s major focus is on MSME, if economy revive on account of government initiatives (like Income tax cuts, GST cuts, etc), company could even perform better
- Company currently has nert debt of 460 cr. Company annual cash flow from operations was around 425cr in FY24, post which company has announced price hikes, so hereon company annual cashflow would be around 600cr, hence company is in very comfortable position to repay debt + spend 160cr on acquisition of new trucks in FY26
- Company working capital cycle is 9 days which is the lowest in the industry, average ROCE is in range of 15-20%
- Company’s last 10year / 5 year / 3 year average P/E is 34x / 36x / 37x against its current P/E of 31x
If company is able to do 8-10% volume growth (on account of economy revival or its branch / truck expansion initiatives), due to operating leverage, it would have high PAT growth and market would take it positively.
Thread link: VRL Logistics - value unlocking due to promoter actions
Q3FY25 call transcript: https://www.bseindia.com/xml-data/corpfiling/AttachHis/5e0c2153-99e0-499d-9911-f27d7212f937.pdf
Q3FY25 presentation: https://www.bseindia.com/xml-data/corpfiling/AttachHis/a5fcd97b-aa26-4337-8fec-ed1d80b9ad62.pdf
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