What’s happening here, huge traction
It seems to be moving since the Annual Report came out
On quick look, one interesting thing in this year’s Annual Report is:
During the year the company has started installation of new plant of boric acid derivatives at the current location of the plant at Pithampur, The installation of the plant expected to be completed by the end of September, 2023 and the actual production expected to be start from the November, 2023.
Though this was first announced on 15th Sept 2022 (https://www.bseindia.com/xml-data/corpfiling/AttachHis/21798132-5d12-40ca-8648-6961366c3e91.pdf)
Them finally putting in money towards the expansion of their core business and possibly some new products is definitely a positive; though no info yet on exactly which products and no indication of the size of capex. We do know that it’ll entirely be funded by internal accruals and the cash on books of 80cr is actually a good number, absolutely no idea on how big the capex would be but even 20cr towards expansion into derivate products might be great and maybe that is what’s making the stock move? (P.S. Just thinking out loud based on the data available, they haven’t given out any more info publically yet)
No signs of that expansion being into Lithium Hydroxide though, because this is clear that it’s just boric acid derivatives.
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Its of Rs 10 to Rs 15 cr only
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They do not have any plan to start this product again.
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Where did you get this info?
I called the company. Got the number from annual report.
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Lithium Battery Demand Surge in India Expected to Bolster Indo Borax and Chemicals Stock
India is poised for a monumental surge in lithium battery demand, and Indo Borax & Chemicals Limited (NSE:INDOBORAX), a manufacturer and seller of boron and lithium products, stands to benefit significantly. With projections indicating that the demand for lithium batteries could reach between 250 to 500 GWh by fiscal year 2033, the company’s prospects are looking brighter than ever.
The recent report, titled ‘EV Batteries: Battle to control EV supply chain’ by Axis Capital, has highlighted that achieving a 250 GWh battery demand would necessitate incentives of INR 1.8 trillion over the period of fiscal years 2024 to 2028, along with an initial capital expenditure (capex) of USD 30-33 billion. This forecast is in line with India’s ambitious goals to electrify its transportation sector and reduce its carbon footprint.
So, how exactly is this bullish forecast going to positively impact Indo Borax & Chemicals Ltd’s stock price?
Increased Demand for Lithium Products : Indo Borax & Chemicals Ltd manufactures and sells lithium hydroxide monohydrate products. With the rapidly growing demand for lithium batteries in India’s electric vehicle (EV) market, the company’s lithium products are likely to be in high demand. This uptick in demand can potentially lead to increased revenues and higher profits.
Positioned for Growth : Indo Borax is already established in the Indian market and has been providing quality lithium products for years. This positions them well to capture a substantial share of the growing market, given their experience and track record.
Market Confidence : A booming industry and an established player like Indo Borax can instill confidence in investors. As they see the company benefiting from India’s electric vehicle revolution, it can attract more investment and drive up the stock price.
Favorable Regulatory Environment : As the Indian government provides incentives and support to the EV industry, it indirectly benefits companies like Indo Borax. The conducive regulatory environment can create a positive atmosphere for the company to thrive.
Strong Financial Performance:
In addition to these promising forecasts, Indo Borax boasts impressive financial credentials that make it a compelling investment opportunity.
The above figure shows operating profit growth for the last 5 years.
Robust Profit Growth : Over the past five years, Indo Borax has demonstrated remarkable profit growth, with a staggering 243% increase. This equates to a compounded annual growth rate (CAGR) of 28%. Such consistent profit growth signifies a company that is efficiently utilizing its resources and generating value for its shareholders.
Strong Cash Flow Position : The company maintains a healthy cash flow position with a consistent 183% growth over the last five years and a CAGR of 23%. This strong cash flow not only ensures operational stability but also provides flexibility for investments in research, development, and expansion.
The above figure shows the revenue for the last 5 years.
Impressive Revenue Growth : Indo Borax’s revenue has surged by 75% over the past five years, demonstrating a CAGR of 11.89%. This growth highlights the company’s ability to capture market opportunities and meet the rising demand for its products effectively.
Attractive Valuation Metrics : The company’s PEG (Price/Earnings to Growth) ratio stands at 0.5, well below the typical threshold of 1. A PEG ratio below 1 suggests that the stock may be undervalued relative to its growth prospects.
Favorable Valuation Ratios : Indo Borax boasts a Price/Book (P/B) ratio of 2, which is below the industry median. Additionally, the Price/Earnings (P/E) ratio is a modest 10.7, also below the industry median. These metrics indicate that the stock may be attractively priced compared to its peers.
Debt-Free Status : The company’s debt-free status is a significant advantage in a potentially high-growth industry. It means that Indo Borax does not have substantial interest payments or debt-related risks that could hinder its growth or financial stability.
Conclusions
In conclusion, the surging lithium battery demand in India is expected to have a positive impact on Indo Borax & Chemicals Ltd. In light of Indo Borax & Chemicals Ltd’s robust financial performance and the burgeoning demand for lithium batteries in India’s electric vehicle market, the company is well-positioned to thrive. These factors, combined with a favorable regulatory environment and established market presence, bode well for the company’s future. The company is well-positioned to capitalize on this trend, potentially leading to increased revenue and growth opportunities.
Reference: Lithium battery demand to reach 250-500 GWh in India by FY33
Disclaimer: The article is not a recommendation or advice as to whether any investment is suitable for a particular investor.
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If there are Chemical Engineers or industry insiders available in this forum, their inputs will be really helpful.
I was trying to understand why there is a high import restriction on Boron and related raw materials in India, but couldn’t find any valid reason (I did find many articles on GOI backing up their stance on the restriction, but not a proper reasoning behind it).
In fact, in the report ‘Critical Minerals for India’ published by the Ministry of Mines in June 2023 (https://mines.gov.in/admin/storage/app/uploads/649d4212cceb01688027666.pdf), they highlight Boron as a raw material with ‘High Economic Importance as well as High Supply Risk’. This further feeds the confusion around the high import restrictions on the same.
Indo Borax’s competitiveness is clearly visible in their high Margins, ROIC and the little to no Capex requirement to grow at high double digits. Understanding the reasoning behind GOI’s adamant stance on import of Boron could contribute to unravelling Indo Borax’s Competitive Advantage and more importantly, whether it’s Sustainable or Unsustainable.
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The company is faring well. But every quarter promoters are selling. The number of shareholders have gone up from 23k to 27k.
I had exited and have no position.
I am looking for opportunity to re-enter but continuous promoter selling (distribution) is a concern. Also, no Institutional buying.
What I was able to find so far:
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I couldn’t find a direct quote or reference. But it seems like Boron is highly dangerous even in small quantities and it’s also used in nuclear reactors. That sort of makes sense as to why there are high import restrictions for Boron.
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There are only 4 large firms with the IS 10116 certification (Requirement to produce Boric Acid in India) - see below. While Avantor seems to be a really big firm, the rest of them are at the same size of Indo Borax more or less. So my assumption is that this is the reason behind Indo Borax’s above average and sustaining Operating Margins and thereby RoCE.
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Of course, as per their AR, they’re the only manufacturers of IP Grade Boric Acid in India. Based on my cursory Google search, I was not able to confirm this. But taking them on their word, and the fact that the major raw material has severe import restrictions, these couple of points could be the source of their Sustainable Competitive Advantage.
Interesting company, to say the least. I just wish the Annual Report offered more information. It’s quite shallow in terms of giving out details on the industry structure and a view of the competition. Even the future guidance is limited to ‘Company will grow well, its product are of high quality’.
References
List of India firms with IS 10116 BIS Certification (Might be dated): https://www.services.bis.gov.in/php/BIS_2.0/bisconnect/knowyourstandards/Indian_standards/downloadLicenses/ODc0
IS 10116 1982 Document: https://law.resource.org/pub/in/bis/S02/is.10116.1982.pdf
IS 10116 2015 Document (Needs login to download): Bureau of Indian Standards - e-Sale Search Result
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