Jimit Shah of Dialwealth attended the AGM today & has kindly agreed to share his report / update with us here.
The key takeaway for me is that as mentioned in the report, the trigger going forward is the expansion going on stream shortly. Not only will the capacity increase, more importantly the quality of the camphor will improve making it pharma grade, which currently it is not. This will be a game changer for the Co. as they can potentially start supplying to all the big pharma boys. I gather the mgt. mentioned Pfizer for one. More importantly, camphor grade pharma commands higher realizations, so the margins are expected to improve going forward. I guess once the investing community is convinced that 18-19 was not a one off, the stock should get valued more reasonably!
The DRT story is also progressing well as mentioned in the report. This could come into play next year. Needless to say that the opportunity size is huge.
Thank you RajeevJ , lots of triggers(quality improvements leading to $$, Capex completion, DRT acceptance, Pharma possibility, retail expansion, capacity throughput…) lined up for next 1-2Qtrs , even if they deliver on some of them, should make market take notice and overdue rerating. Current macro makes this wait and watch interesting.
Attended the Agm of mangalam organics held today at Khopoli
Key takeaways
Changes in the camphor industry are more of structural in nature and not a one off
Company has been exporting camphor to China as well and imports from China are nil
Bulk of the capex is nearly over and impact should be seen from October
Major Benefit from the current capex is not only higher volumes but the quality of camphor will now become pharma grade and will be exported to all major pharma companies across the globe,company is likely to receive GMP certificate as soon as in next quarter
As far as retail operations are concerned they are doing well and there brand campure is accepted we’ll by the customers
Management said during last AGM their products were sold only via 100 retail outlets but as on date they are sold by more then 700 retail outlet and they have also recently done tie up with reliance retail and spencer which will again add to there presence in a big way
Company is also planning to launch few more products under the brand campure
Mangalam has not only added a new plant but also revamped their old plant which will help them to get better yields which will indirectly help them achieve higher margins
ON DRT TIE UP Mangalam has already made the product and at present it has been sent to major tyre companies in EUROPE and product is under final stage of approval,management expects to start export in current financial year that is in next 3-6 months
We asked management on their dividend policy :-Management said bulk of the capex is behind us and management will come out with a dividend policy as well and once there is clarity on Tax of buy back board may consider a buy back also.
Raw Material – Specifically mentioned that company do not import crude gum or oleo resin. Company imports Gum Turpentine as well as alpha pinine. Both inputs needs to get distillated as a first step ( To convert GT into alpha pinine or to improve quality of alpha pinine, since different countries have different % of alpha pinine concentration)
Capacity – Bit of contradicting responses. First confirmed stated 550MT/month capacity of Camphor. Current utilization @90%. When asked about how to grow future revenues, response was they have overall approval from MOEF to produce variety of products from 1400-4000 tons/month. So they have flexibility. 20 Cr Capex done in FY18-19 would also add some capacity by efficiency improvement.
DRT tieup – Long product approval cycle (2 years), in progress, expect approval in 6-9 months time. No sale till now due to DRT. Not a game changer as future revenue due to synthetic raisins would not be very high as a % of overall sales. I see it more as a market recognition, technical help
B2C business – Miniscule revenue as of now (single digit %). Mainly in Modern trade. Will be present in 700 stores in India after Reliance deal. Already present in D Mart, Hypercity, Spencers. (Year back, they were present in around 100 stores) General trade and E Commerce contribution to sale is very small. More focus on Mangalam brand of Camphor for Puja. Campure is very very small, brings more excitement and visibility. More focus on B2B2C (sales through platforms like Amazon business, ShopX etc) for Campure. Will be doing some communication this year (read advt/promotion) to create pull. Total market for Camphor (for Puja) in India is 17,000 tons (mainly general trade) out of which around 15,500 tons would be unorganized.
Customers – Main customers are Tableters (around 2000 in India) to whom Company sells camphor powder. Highly fragmented customer base. Top 5 customers may be contributing below 15% of total sales. Need to protect tableters business while deciding retail pricing policy.
Employees – Total employees – 190, trying to hire 20-25 focused on QA for GMP certification.
Capex – FY18-19 Capex of @20 Cr was spent mainly revamping old plant, improving quality of camphor to international pharma grade purity, to enable GMP certification for export , to improve productivity by reducing losses etc. No clear answer for future capex
Sales – FY 18-19 increased revenue purely on account of increased market prices of camphor. No volume increase during the year. Camphor prices are in direct relation with gum turpentine prices, maybe with a lag. (Gone up more than double in last 3 years) The ratio of camphor price to GT price may change from time to time.
Margins – To the question about whether 30% EBITDA/12%PAT is sustainable for such commodity product, management response was margin were always there in Camphor industry. Company could not deliver margins as they were more focused on synthetic resins which is low margin businesses. In last few years, company pruned down offering and focused on good quality/high margin products. Plant revamp provide more flexibility in terms of products. Level playing field with China in terms of camphor pricing. China finds more remunerative to export to rest of the world than to India.
Working Capital - Payment terms - B2B - 0-30 days. B2C terms – 30-60 days , Inventory – Mostly from B2B as need to hold inventory for customers, in warehouses/ports etc. B2C – No material waiting for dispatch, so hardly any inventory.
Investor outreach – Improved AR for this year was the first step in this direction. Planning to start with investor presentations by end of this year. No plans for concalls as of now. Requested Management to improve their BSE reporting like “launch of new product” or " new plant opening" or “capacity additions” etc. Akshay mentioned that he will look into it.
In general, I think DRT/B2C is much longer term story than imagined. Management was open to share their thoughts at the same time conservative (rightfully) to protect some information due to competitive reasons. I believe Camphor price is the key watchout. It is holding steady as of now but if due to crude price going up, Gum rosin demand and hence production start going up, which in turn could impact gum turpentine prices negatively. (although chairman mentioned that this will take 1-2- years as pine tapping schedules can not be changed in short timespan)
I may have misinterpreted what was said and discussed during the meeting. So please feel free to modify if you have attended this meeting.
Discl - Holding minor position at a loss, so interested in company. This is not a buy/sell recommendation.
these products are selling like hot cakes. It is replacing good knight mosquito repellents in a big way in Gujarat. Mainly due to widespread dengue attacks and peoples trust in Kapoor as a good protection against mosquitoes and increased awareness about chemicals used in chemical based mosquito repellents.
These if succeeds the way conventional repellents like good knight has, there will be exponential increase in Kapoor tablet sales. It will multiply in huge numbers.
It’s a very big opportunity I think, good enough to absorb entire capacity built up. And this will be more of retail sale so better margins.
Good knight mosquito repellent has two parts one is the plug that generates heat (console) and the tablet or strip that is placed on console which on heating emanates the repelling fumes.
This is a console which heats and the Kapoor tablets are to be placed on these which will evaporate and emanate Kapoor fragrance.
For last 3 months or so, MoC has been releasing what they are calling “Provisional” data and revising it a month later to Actuals and I have noticed a few errors in the same time between provisionals and actuals in several commodities. I think this could be one of those because August (that is two months back) definitely did not have Camphor wholesale prices crashing to 1/5th of what it has been for over a year. Indiamart prices appear unchanged and no one is selling it anywhere near this price (median still between 800-900/kg). It could be an error so It might be better to call a supplier and confirm.
Price sensitive retailer like D-Mart is still selling for Rs.155 for 100gms. Another way to think is that the promoter bought 2% shares from open market mid-September which I doubt would have happened if prices were 190/kg in Aug from 950/kg in July. AGM notes above too from September says Camphor prices are holding steady. Still worth checking and confirming.
Mangalam organics wholesale price is 715 per kg ex-Bhiwandi +GST and imported(China) is 790 per kg retail is anywhere between 1500-1800 per kg INFACT due to reduction in raw material spread for domestic player would have improved
Overall good results. Management is quite confident of growth in e commerce and overall too.
Can’t understand what it means by “New Technology implementation under progress”? Is it something new or talking about recent expansion?
Do they have started production in new plant or we have to wait for it?
The Co. came out with pretty decent set of Q2 number. While Sales at 120.97 Crs grew by 10.9% for the qtr, the EBITDA at 28.1 crs grew by 31.66% & PBT at 24.27 crs grew by 27.2% . The PAT was lower due to an exceptional item of Rs. 4.48 crs in Q2 last year & higher tax outgo in the current Q2.
The completed expansion carried out during the last six months, net of depreciation, was about 20 crs. Further WIP is shown at 14 crs refers to expansion completed post end of Q2 or to be completed in this qtr. The effects of the expansion will only begin to be reflected from the current qtr.
The mgt. commentary on the Q2 numbers as well as the outlook for the rest of the year is quite positive. With the mgt. itself increasing stake at regular intervals, the prospects look good indeed.
Sir, can you pls confirm the present camphor price from wholesalers as you have shared before?
Present panic seems due to rumor of sharp drop in camphor price
I have talked to some small wholesalers in Mumbai where camphor powder price is at around 650 per Kg(last month it was at around 700) and camphor tablets are at around 1000/Kg.
Though it is slight drop in price, nothing seems alarming as of now
I recently found that amazon has started selling camphor under the solimo brand. I think this is further proof that now Indians are using camphor for sanitation in addition to religious purposes.
Also, generally amazon sells inhouse brands at some discount to well known brands but here I see that their price is much higher than Mangalam.
Changes in the camphor industry are more of structural in nature and not a one off
