Manali Petro- Capacity Expansion

Stock Opportunities
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Manali Petrochemical Ltd (BSE Code: 500268) (CMP: Rs.18.7)

MPL is a leading producer of propylene oxide (PO), propylene Glycols (PG), and polypols in India. These products find application in various industries and are used in products such as pharmaceuticals formulations, food flavors, fragrances, detergents, perfumes, toilet soap, automobile seats, garments, furniture, mattresses, adhesives, refrigeration, coatings,resins, etc.

Anti Dumping duty is planned by India Government against China & Taiwan will be levied so as to support MAKE IN INDIA program.

MPL has completed expansion at ennore port for raw material storage by 3 times.

MPL is likely to post NP of Rs.76 cr for FY 16 with EPS of Rs.4.5(fy16). at consistent dividend payout of of 17.5% div yield will be close to 5%.

Company has Zeo Debt. AT THE CMP OF Rs.18.75 MPL has mkt cap of just Rs.322.5 cr. With the fall in crude price, margins are likely to improve.

Some links

while the above news was denied, i think that Manali does have strong capability.

http://www.bseindia.com/corporates/anndet_new.aspx?newsid=f7492d17-3438-4281-9d10-5ead4f8f5002

Issues

Company is part of SPIC group and they have had entities which went through CDR

in the Q4 Results the company paid 17 crs rent which they clarified as arrears -waiting for annual report to get more clarity.

Price volatility - if anyone hasa clue about specific commodity cycle here … appreciate your views

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I had looked at this company, but could never get my arms around RM price volatility and their realizations. Also a lot of the import is through Singapore which is a way to circumvent ADD from China etc.

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DoVai,

Please be careful about only Petrochemical company with Zero debt. Given the kind of 100s of pertrochemical product and its derivative, it is difficult to verify this information. Can you please let us know source of this fact?

“ONLY PETROCHEMICAL COMPANY WITH ZERO DEBT.”

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Example, Clariant Chemicals Ltd, Jaysynth Dyecstuff (India) Ltd, Shree Hari Chemicals Exports Ltd. All these are listed companies which also have FY14 debt being zero. This are some companies which are in my knowledge and there would be many. I believe we have around at least 100+ listed player in the sector and hence need to be careful when we write on the forum.

Thanks

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Please post the past results of the company to validate your investment thesis.

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Edited the post to use correct langauage. apologies

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:thumbsup: Great. Please avoid generic optimism/pesimissm…

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You have not disclosed your holdings. This is a must for starting a new thread on the company.

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Disclosure : i am invested and am looking to buy more

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Hi DoVai,

Good to see you trying to follow the guidelines and suggestions of moderators.

I have been tracking Manali and few things which I liked were:

  1. Good growth in profitability in 2016 yet, the stock price hadn’t moved and hence valuations were attractive.
  2. Co is debt free
  3. Very less working capital and improving cash flows.

However, like people have mentioned above, its not easy to understand the product and if the same is cyclical. Also, the co talks about risk of dumping by other Countries. Another negative was the provision for rent in the latest quarter…if it is actually one time and not to get repeated then the stock seems quite undervalued. Another positive is that they seem to be talking about expansion after a very long time (if you search for Manali + pollution control then you will get articles that expansion was not allowed earlier in the area). So this could be a good trigger.

Awaiting their latest annual report for more clarity.

Regards,
Ayush
Disc: Have a small exposure to track and understand

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This company was on my radar as well as it was available at good valuations (14-15 Rs) despite posting good numbers lately. The reasons why I passed on this was that the industry is quite competitive and cyclical with no visibility on the earnings. ARs talks about highly competitive nature of the industry and threat from big MNC players. Even in their announcment regarding expansion, they talk about these threats of MNCs.

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Yes, even I looked at it and I couldn’t really figure out the Demand Supply situation. Their RM is imported majorly and one needs to understand that as well. Lot of moving parts. Thus conveniently moved it to the ‘too tough to understand’ bucket

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One of the negatives mentioned was lack of clarity on the rent paid in last Q.
My findings online lead me to believe that this rent paid was in relation to purchase of immovable property of an associate company namely Tamilnadu Petro whose Epychlorohydrin plant was closed down in 2013.Transaction was to be completed in June 2015.MPL had carried out feasibility study through a consultant and where it was proposed to manufacture PO at the closed Epicholrohydrin with use of existing setup. Manali has had to import PO at higher cost due to capacity constraints in existing setup. Remodeling the plant for PO production according to the report will require investment of 12 cr. Approx.
So the management after getting clearances is going to finally expand it’s PO capacity which was much needed as it already has expanded its Polyol capacity and plant utilisation will now go up after brownfield project comes on line .

Please go through supporting links to my findings and attached report for further details.
http://www.goodreturns.in/company/tamilnadu-petroproducts/notes-to-account.htmlFeasibility report Manali expansion.pdf (780.9 KB)

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Hi @Duval,

Interesting digging. It does make sense but the rent paid in the March qtr was 17 Cr while the report talks of total investment of much lesser amount. If it was a capital investment then it shouldn’t have been expensed in a single quarter?

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The good returns link. . Point 7. . What can be infered

Maybe it’s not outright purchase and the land has been leased to Manali by its associate

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If its an outright sale then as per accounting it should be a capital investment and not rent.

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While digging earlier, one of the issues that came up was regarding some CG issues with the Co, though not sure of its correctness as I didn’t dig deeper into it. May be, What Ayush has mentioned is one of those issues?

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The company seems to have paid rent it earlier refused to. .

http://www.cmlinks.com/majorgainz/present.asp?comp=&cocode=1792&yrc=201312&Mode=Q

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Hi @Duval,

Yes, this makes sense. Good work!

Regards,
Ayush

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anti dumpimg imposed on finished product of manali in april 2015

http://www.cbec.gov.in/customs/cs-act/notifications/notfns-2015/cs-add2015/csadd09-2015.htm

but earlier dgs was against it

http://articles.economictimes.indiatimes.com/2015-01-18/news/58200759_1_safeguard-duty-cheap-imports-domestic-industry

is this anti dumping extension or new …

regards
manoj dua

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