QTR results are out . qoq increase in EBITA margin . Qtr Investor Presentation
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The June quarter results came along expected lines. The plant shut down due to Covid has resulted in lower sales, but the margins are not impacted, which is heartening. As mentioned in the Investor Presentation, the Co. is hopeful of bouncing back in the remaining quarters.
The Co. has invested about 90 Cs in the last two years on Property, Plant & Equipment which is a very major expansion given the size of the balance sheet. As discussed earlier on the thread, this expansion is more in value added derivatives, the effects of which are perhaps only beginning to trickle in if at all.
We are fortunate to have the likes of Kumar & Sanket here who have done some excellent research on both the Camphor industry in general as well as the Co. itself. The links posted by them must have taken a lot of digging & the Mangalam investors would do well to go through them in detail. It is evident that Camphor potential is enormous.
The stock itself is probably changing hands with a lot of churning & high volumes, which is not necessarily such a bad thing. With stronger hands coming in, even a slight re-rating could prove highly beneficial to investors who have experienced a bit of a roller coaster ride these last few months!
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Circuit Filter for Mangalam Organics Ltd changed from 5 % to 10% w.e.f. 07 August 2020 as per BSE Notice.20200806-35.pdf (67.7 KB)
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Global Camphor Market is driven by growing demand for making medicine for different type of diseases. Global camphor market is anticipated to grow at a CAGR of 8 % over the forecast period (2018-2026).
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38th Annual General Meeting of Mangalam Organics Ltd on 29.09.2020 at 3 p.m through Video Conferencing.AGM Date 29.09.2020.pdf (384.7 KB)
Would be eager to hear from Management on Resin Margins, Future Plans and Demand.
The Mangalam stock is up about 50 % in the last couple of months amidst rising volumes. Camphor prices having doubled in the recent past may also have something to do with it.
When Mr. R.K.Damani’s name as a share holder first came in public domain after the Co. released the share holding pattern for June 2020, a great many so called well wishers of retail investors went viral on social media, warning investors about staying away from the stock as RKD had picked up his stake at lower prices a month earlier. The fact that valuations were attractive was not a factor important enough to be considered. I suspect none of these well wishers were holding the stock!
Where the stock goes from here depends largely on when the effects of capacity increase of about 200% comes into play. If it were to come about in the current quarter, the stock could well get re-rated from here as even at current levels, valuations cannot be said to be expensive by any stretch of imagination.
The mgt. hopefully will continue to hike its stake in the Co. for the third consecutive year by about the maximum permissible limit of 5%!
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Phenolic resins found many different application areas in the last century and these fields will be active besides additional areas on the horizon of their second century of existence. Recently, impregnation in carrier materials such as paper, fabrics, organic or inorganic fibers is still one of the major application fields for liquid phenolic resins. And, nowadays, laminates from such phenolic resins have gained significant market share in furniture, flooring, and the construction industry. Moreover, phenolic resins have a wide range of usage in friction materials such as brake linings, disk pads and clutch facings in the automotive industry. Besides, alkylated phenols such as phenolic resins are used in conjunction with elastomers as reactive compounds. These include their use in the formulation of several rubber adhesives and in the production of rubber articles. The ability to adjust features of phenolic resins through substituted alternative phenolics materials could enable the use of phenolic resins with a wide variety of different elastomers. Thus, research in this area is active in both academia and industry. In addition to these classical applications, phenolic resin based composite materials are extensively used in a wide range of products, even though the composites market is one of the highly competing market. Phenolic resin composites can be encountered in aircraft interiors, defense applications such as blast protection, architectural infrastructures, and marine transportation. For example, phenolic resins are essential adhesives in the production of honeycomb sandwich panels. Additionally, latest developments in molding compounds and ability to use long glass or carbon fibers will provide opportunities in replacing some of ceramics and metals in applications where weight reduction is vital for better fuel efficiency.
https://onlinelibrary.wiley.com/doi/full/10.1002/ijch.201900086
Global Synthetic Camphor Market
The pharmaceutical industry is rising due to the increase in medical complications. Increasing utilization of synthetic camphor to treat respiratory disorders, mild joint pains caused due to arthritis, and mild cold and cough have fueled the use of synthetic camphor in the pharmaceutical industry. Thus, rise in the pharmaceutical end-use industry is foreseen to act as an opportunity in the global market.
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Synthetic Resin
MOL manufactures three broad types of synthetic resins i.e. Terpene Phenolic Resin, Alkyl Phenolic Resin and Rosin Esters , with each of them having a large domestic and export market. The Company is confident of all the categories in this segment and is continuing its efforts to enhance margins and build higher volumes in each of them.
MANAGEMENT OUTLOOK
During the year 2020-21, the Company expects its investments in various projects to add to the top and bottom-line. The Company will continue efforts to improve the bottom line by further increasing efficiency in their existing production capacity, while re-looking at business strategies and models, wherever necessary.
FY 2020-21 started with a depressing note because of the severe intensification of the Covid-19 pandemic. However, the Company expects to bounce back as soon as economic activities are
normalised. With its continuous efforts on improving efficiencies and margins, barring unforeseen circumstances like the present outbreak of Covid-19, the Company expects to achieve steady
results in FY 2020-21.
Commodity to FMCG Space
Camphor was earlier sold as a commodity. However, as it presents a large retail opportunity, it enables the Company to forward integrate and diversify into the FMCG space by retailing the
products through Modern Trade, General Trade and E-Commerce. The Company continues to leverage the growing retail opportunity and is confident of continuing growth in the years ahead. It
continues to grow grades offered from the same unit to capture a larger market share in the domestic and export markets.
Promoters Remuneration has been decreased from 10.48 cr in 2019 to 9.60 cr in 2020 due to lower profits. A good sign of Corporate Governance coming into picture. It will be great to watch how it unfolds in the coming years.
FY 2020-21 will be better mostly due to below factors 
- From Commodity to FMCG Space
- Synthetic Resin - Way for better margins
- Good Corporate Governance
- Lower Finance Cost as major borrowings have been repaid during the year.
- No More major exceptional items as there is no major contingent liability as on 31.03.2020
AR Mangalam FY 2019-20.pdf (6.2 MB)
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As per my knowledge, China started shutting down pollution making plants from around 2017, with Graphite electrode making companies & because of that HEG & Graphite India were in best position to gain. Same is happening with other chemicals & some Steel plants also. But for Mangalam Organics, it’s about having a moat as they have access to DRT’s international distribution network. For Kanchi Kapooram to develop this huge network may take money & years. You can say it Economies of scale.
Management may claim that they manufacture Terpene Phenolic Resin (TPR). This product was meant for export through DRT distribution channel. Monthly export data upto May 2020 shows no export of TPR. In any case, their agreement with DRT was revoked a few months ago.
Disclosure: was invested but sold out some months age as I thought the drastic decline in share price to 160 level was not natural, and may have been for the benefit of some big name.
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Synthetic resin
Mangalam has client such as – Henkel, Bostik, Pidilite and H.B. Fuller
M/s. HENKEL ADHESIVE TECHNOLOGIES INDIA PVT. LTD. (Henkel) is a subsidiary of Henkel AG & Co. KGA, Germany. In India, Henkel is the market leader in Adhesives, Sealants and Surface Treatments for consumers, craftsmen and industrial applications.Henkel solutions are used in diverse segments ranging from manufacturing, electronics, automotive, aerospace to biomedical industries. Well known brands in India include Loctite, Teroson, Bonderite, Technomelt & Aquence.
Henkel has completed Phase I and Phase II expansion which is of around 400 crores and expecting more 400 crores to come in coming 4-5 years
https://www.financialexpress.com/industry/henkel-to-invest-rs-400-crore-on-india-expansion-plan/1856189/.
MPCB expansion letter dtd 05.09.2020Uploading: Henkel Adhesive 04.09.2020.pdf… and Pre Feasibility Report of expansion plansHenkel Adhesive Pre Feasibility - PVC & Phenolic resin(180).pdf (1.2 MB) for better clarity.
The Distance between Henkel Plant and Mangalam Plant is hardly 45 km.
Interview with Shilip Kumar, President, Henkel India on Industry future prospects and company plans. Henkel term them as Speciality Chemical company rathar than Commodity Chemical company.
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H.B. FULLER INDIA ADHESIVES PRIVATE LIMITED is an industrial adhesives manufacturer located at Plot 1E - Sr.1129, Shirwal, Satara - 412801.
It has presence since 1887.The History of H.B. Fuller
It is also on expansion phases.HB Fuller June 2020.pdf (7.6 MB)
Pidilite Industries Limited, is an Indian adhesives manufacturing company. It also sells art material, construction chemicals and other industrial chemicals. Its recent expansion Pidilite 07.09.2020.pdf (6.3 MB)
BOSTIK India Private Limited (BIPL), an Indian flagship company of Total Group (France), is one
of the leading adhesive manufacturing companies in India with an annual turnover of INR 200
crores and an export presence in more than 10 countries. Its pre feasibility report gives detailed picture of its usage of Resins in their operations.http://www.environmentclearance.nic.in/writereaddata/Online/TOR/0_0_12_Mar_2015_1657342371Annexure-Pre-FeasibilityReport(PFR).pdf
Domestic Market has also huge potential for Resins in the coming years and Mangalam have partnered with all major global and Indian players which are using resins.
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I attended the AGM but it was inaudible. If anyone else attended . request to share a note .
Thank you in advance
Share prices have been falling down since past couple of days, any idea what could be the trigger? Any surprising news came out in AGM?
I attended the AGM through Video conferencing yesterday. The story is very much intact. The focus is to get into value added intermediate products so as to de-risk the Co. from the vagaries of the commodity cycle. The recent investment of about 90 crs. in capacity expansion, de-bottlenecking & modernization of the plant is a step in that direction.
The Mgt. also clarified that they were already making pharma grade camphor, & hope to improve the quality of camphor further in the near future. The second half of the year should see the effects of the capex trickling in, in the sales & profits. Retail branded sales continues to be a focus area & its percentage of the total sales will keep going up. With most of the capex already done, & a clear road map ahead, Mangalam should become a much bigger Co. going forward with newer products & better margins.
The recent price correction in the stock price is nothing new for the stock. The stock is not for the faint hearted. It has seen sharp declines many times in the past as well. As liquidity is an issue here, the operators tend to have a field day. With a sudden price drop, the retail guys are quick to panic & throw in the towel & sell. A contrary strategy would be more rewarding. Buy the fall & lighten your position whenever you get a 50% increase. This however should be done only for the trading part of your portfolio. I strongly believe that one should retain ones core holding in the Co. for the next couple of years as I am personally doing. The best days are yet to come!
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Thanks Rajeev, as you suggested, I am planning to increase my stake with this correction. Currently this is the second biggest holding in my PF.
Any ballpark idea as on how much sales and ebitda we can expect in FY21, FY22 & FY23? Has management given any guidance and how have they performed on their guidance in past?
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Very true. That may be strategy of long term investor to accumulate share at lower price.
All Camphor manufacturing Co.'s like Mangalam import their turpentine oil based raw materials like Alpha Pinene. Post lockdown, amidst tensions with China the import was largely restricted resulting in a surge in raw material prices. Camphor Co.'s as a rule pass on the price increase to the consumers keeping their margins intact. Higher the RM costs, higher the Sales higher the profits.
So all camphor manufactures should have a very good September qtr, with a boost in sales & profits. The recent fall in the share price is all the more surprising.
Mangalam is in any case trying to break the commodity nature of the business by getting into value added intermediates across the value chain. A lot has been happening in the Co. over the last couple of years if one looks closely. The change is being driven by the Gen-next, led by Akshay Dujodwala who is not only leading the Co.'s retail (B to C) business but is trying to bring about the much needed fresh mindset to take the Co. forward. The quality of the Annual Report, the updates after every quarterly results, the thrust of branded business are all steps in the right direction. With old companies like Mangalam, there are always legacy issues & bringing change is a gradual process. So keep your faith guys. Mangalam Organics will be a much bigger Co. with with larger consumer interface & more value added products in about 18 to 24 months.
Its not for nothing that Mr. R. K. Damani has put his faith in the Co. & its mgt.
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What I was looking for but couldn’t find out is how they plan to increase utilization. They have increased capacity by 200% overall. But don’t have a visibility into what is current utilization and how much they aim by FY21, FY22 etc.
Any idea on that?
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