ValuePickr Forum

Indo Amines Ltd - A fast growing company which seems to be undervalued by Mr. Market

Indo Amines is a specialty chemicals manufacturing company. It has been around for a long time (IPO in 1994. https://indoaminesltd.com/about/)

From the annual report -
“Your Company is a leading manufacturer of Specialty Chemicals with diversified end-uses into Agrochemicals, Pharmaceuticals, High Performance Polymers, Paints, Pigments, Printing Inks, Rubber Chemicals, Additives, Surfactants, Dyes, Flavors & Fragrances, Home & Personal Care applications, etc. Your Company makes continuous efforts to explore and innovate new products & processes in all
segments. This diversified end-user base helps the Company to reduce its risk from downturn in any individual business segment andalso to capitalize on the growth opportunities in each of the end-user segments”

It has 6 manufacturing sites in India with 4 under construction (https://indoaminesltd.com/). Their website claims to be one of the largest manufacturing companies in South Asia.

They seem to have 3 product lines of chemicals - fine, specialty and performance (https://indoaminesltd.com/products/). I couldn’t understand the technicals but broadly it is manufacturing chemicals which has end use in a significant number industries.

Financials from screener.in:

Screen Shot 2020-01-18 at 12.59.19 PM

Screen Shot 2020-01-18 at 1.00.51 PM

Screen Shot 2020-01-18 at 1.01.24 PM

Pros:

  1. Good dividend payout in the last 10 years (~15-20% of profit can be expected as dividend going by history)
  2. Greater than 15% profit and sales growth in the last 3, 5 and 10 year periods
  3. Reasonable low valuation of PE - 7.85, Enterprise Value to EBIT: 6.71
  4. Good ROE and ROCE of > 20% consistently
  5. Promoter holding is high at 73% (Would love to hear more about promoters as I couldn’t find much…)

Cons -

  1. It is a very small market cap company - 187 Cr mCAP
  2. Debt seems to have increased - 123 Cr currently (Would have been great if it had grown without taking on so much debt)
  3. Annual report is not great to understand the business properly
  4. Don’t know the global threats to this business as I guess, its customers could buy from China etc… Don’t understand competition also
  5. Employee review of the company is not great (https://www.ambitionbox.com/reviews/indo-amines-reviews, https://www.indeed.co.in/cmp/Indo-Amines-Ltd/reviews)
  6. The promoter family (Palkars) are getting > 1 Cr salary while other key personnel are not getting good salaries

Why I am thinking of investing?
Growth seems good… for this type of growth, PE seems very less and the stock should appreciate significantly if the last 10 year trend continues for the next 2-3 years in my opinion

Please share your views.

(Note: The stock price went up significantly last week unfortunately when this post was removed by moderators. Please check the valuation numbers again whenever you read this. I have not yet invested)

1 Like

Guys, noone is interested in this? Please see this… seems like a good stock which is ignored by the market at the moment @dineshssairam @crazymama and any other knowledgeable folks would appreciate a lot if you can share your opinions

Hi @alexander,

Have not really looked into Indo Amines much. Primarily because the numbers are poor.

Consistently negative poor FCF despite >20% RoCE over the last 10 years.
Fragile Balance sheet with majority of the debt locked in Working Capital loans and Maintenance capex (debottlenecking).
Though Debt to Ebitda is <2, I still do not feel there is sufficient Margin of Safety.
Poor capacity utilization @ 60% which implies they are yet to get any benefits of scale.

Following are the Concall Notes I transcribed today.

For a better informed opinion, I would suggest to reach out to @jitenp since they have been consistently present in above concalls.

Looks a decent company and mkt is probably pricing in all the negatives.
Personally I would like to see higher capacity utilization with higher OPM before I take a relook.

Disc: Not invested.

2 Likes