ValuePickr Forum

Gujarat Ambuja Exports

Couple of points to as per my understanding so far please correct me if I am missing out anything or misinterpret something ….

  1. Company is mainly focused into Maize Processing and Soya Oil Extract . Main raw material are Maize and Soya so working capital need spike up during the time of inventory and ease up rest of the time in the year.
  2. Commodity cycle and MSP for Maize is a key concern but GAEL is able to procure corn at 50 paisa to Rs 1 cheaper than competitor which is a good 4-6% advantage on typical corn procurement cost of Rs 12-16 (Rs 14 MSP).
  3. Capacity utilization is around 90% but Agro Processing (Soya Extraxt) is only 30% so no more capital is needed in this front.
  4. Currently they are setting up forth maize processing plant in Calisgaon with 30 acres for greenfield leaving out rest 70 acres land for brownfield expansion in Phase II. Both phase will add 1000 ton/day capacity against current capacity of 1950 ton/day. Total capital outlay 325cr which will be funded through internal accrual and projected sales revenue is of 700-750cr. Phase I will be operational on Oct17 and Phase II will be operational on H1FY19. It also has bought land at Uttaranchal to setup 5th plant with 750 ton/day capacity.
  5. Mohit is completely out of the strategic decision due to his difference from Manish and now Manish will have the entire control.
  6. Manish track record is very good since last 10 years and the high Salary he is taking is high but due to 6% of sales profit he is drawing from his distribution channel as commission which is directly linked to the profitability of the company. Just like his father who is getting 5% of sales profit. I am not sure if we can consider this as a red flag or not but since the company is having a very less long term debt of 15cr so I feel this is somewhat justified unless we have seen they are taking debt due for capacity expansion.
  7. Dinesh Shah has joined then as CFO whose track record with Meghamani Organics was excellent , so we can expect GAEL will be margin attractive going forward since focused will be on specialty chemicals like HFCS [High Fructose Corn Syrup ] which is a very good supplement for Sugar and also cost effective.
  8. Current quarter slowdown is due to mainly GST impact and might be carried to the next quarter as well but then onwards it will going to have positive impact on this company. Another factor comes in as inventory loss due to lower price of maize. The second factor is a definite concern I am not sure how the company going to address it.
  9. Current trigger in my opinion is HMCS, HFCS, Sorbitol, Malto Dextrin, Dextrose Anhydrous specialty chemical segments since there is a trend in the world to reduce dependency on sugar and move on to other avenues where China is a frontrunner since 2004 but in Indian the prospect is still not clear but with the growing health and environmental awareness it is expected that sooner or later India will move into those products. Having said that the export option is still wide open for this company due to cheaper cost as a complementary sweetener.
  10. Valuation is not very less mainly due to it’s B2B legacy business but if we consider them in the specialty chemical segment with strong distribution channel and good export option then we can say this is a very good value bargain at this point of time. Correct me if I am wrong.
  11. Not having any idea about their Textile and Power segment.
    I am looking forward if someone can give a quantifiable number on their sales projection as per the management from the Maize Processing segment is 750cr from new plant along with the existing 1400cr and from the exiting Agro Processing segment can be scaled up to 3 time from the current 1,800cr.
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Looks interesting… Have bought a tracking position in this

Despite the hike, prices of key oilseeds such as soybeans and rapeseed are trading below the government set price level in physical market, angering farmers.

“Prices of oilseeds have fallen sharply in last few weeks. There is no option but to raise import duty to support farmers,” said a government official, who declined to be named.

How could this affect GAEL?

http://www.blackseagrain.net/novosti/india-could-raise-import-duty-on-vegetable-oils-including-malaysian-palm-oil

Maize processing has not taken off as expected it seems. Results out. @RajeevJ ji your views please?

http://www.bseindia.com/corporates/anndet_new.aspx?newsid=c00f4eb6-db3e-4dbb-8c0e-56cdbc079f1a

Disclosure: Invested

Yes. I feel this may be the effect of GST and the maize inventory pileup. If you notice segment wise revenues, Maize revenue is nearly flat YoY. However operational expenditure has brought down the bottom line. The revenues from Chalisgaon plant will be reflected only from this quarter onwards. Should explore further

Hi KC,

Thanks for posting, i heard they have planned to put a separate plant for HFCS. Replacement to sugar can be a game changer. Do you have more inputs in this regards…i mean how do they plan to move and if they require any regulatory approval. Are they first mover or some one in the industry has done similar project?

Thanks for quick inputs! For a company like this who is not organizing concall or share presentation. How do you check on the quarterly status? Q2 they didnt do well on their bottomline and margins have subdued ? how do you manage to get update on various growth prospects?

hi 1.5 cr,

Thanks for your valuable inputs. I found another company called Sukhjit Starch - https://www.screener.in/company/524542/ . They seem to be in a similar business and are in the process of setting up a new mega food park. How do you compare the 2 businesses?

There is a separate thread for it check that Sukhjitstarch and chem (BSE CODE 524542)

Thanks for the insight. You also mentioned that GAEL is running at max capacity. Isn’t the new chalisgaon plant supposed to fix this problem?

Came across this article which talks about the negative effects of HFCS and how its usage is coming down


"soft-drink makers have also been shifting away from corn syrup and back to actual sugar"

The Gujarat Ambuja story seems to be getting better with each passing quarter. The stock weathered the recent storm (correction) reasonably well & came out relatively unscathed! Though it has doubled since I first wrote about it a year ago, it’s still looking good to see higher levels as the complex corn derivatives story will only begin to play out now, most probably with Q4 of the year gone by (17-18). The scope is huge if it can gain acceptance as a sugar replacement as is the case in the developed world.

As is always the case, the story seems to be finding favour with the investors after it has reached a certain market cap. When it was a double digit stock, it had far more sceptics!

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Some bad news…dont know how it impact GAEL…

Company has given disclosure that it hasn’t got such order…

https://www.bseindia.com/corporates/anndet_new.aspx?newsid=0a65b08f-3fe2-44bd-b59c-4029602e9658

Why revenue was down in Q4FY18 ? Any reason ?

De-growth is due to the the conscious business reduction of the company in Oil Trading business, They had a 30% plus decline in agro processing(Oil Trading business) in Q4, this has actually benefitted the company to increase the Gross margins

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Any impact of this on GAEL?

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Good overview of the company by Stalwart Advisors

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