Ingrevia got demerged from Jubilant Life science and started trading from yesterday at a very moderate valuation to peers it seems. There is not enough information about the past years & Balance sheet but the information provided by the company in the investor meet this week gave most of the required info about the company. The fair value as per me with an estimated EPS (INR 18) for FY21 should be 360 or thereabouts so it seems to not have been correctly valued yet & the market has to correctly price it as per sector & EPS. I am of the opinion that this will be a long-term compounder & is available with enough Margin of safety for now.
Bhartia Group is a well-established & reputable group and have been successful so far. They have interests in various sectors & this demerger of Speciality chemicals business was done to unlock shareholder value.
They operate in 3 sectors -
They have a long runway for growth in all three areas they work in and have provided the below summary of market landscape.
They have leading position in many of the products globally & have backward integration for many giving them the advantage of being cost competitive.
The products have use across Pharma, Nutrition, Agro chem, Industrials & consumer products. which are all growing at a decent pace.
They have worked on their internal operations to optimize and that has resulted in efficiencies and cost savings.
CDMO services are also taking off, They have 7 projects in pharma and 4 in agro sector. They are doubling their existing CDMO capacity & have order book of ~250 Cr. Going forward this should contribute larger revenue with higher margins.
They are planning 900 Crs of capex for next 3 years (550 in specialty chemicals,100 in Nutrition & health chemicals, 250 Cr in Life sciences chemicals) which should further expand the capacities, Currently they are running at 70-80% utilization.
They have provided the below information on revenue comparison for Fy21 & FY20 from all verticals and the margin profile which I think will improve further going ahead.
Also, seem healthy & growing in all balance sheet metrics.
Will they be able to scale & grow profitably in the times to come remains to be seen?