Mangalam Organics Ltd. - A promising Pine chemistry story

Significant drop in prices in Jan

Since this is a commodity, this amount of volatility in prices are acceptable in my opinion. Future prospects still look good, numbers might also show up in coming months with capacity realisations.

Mangalam organics is undergoing structural changes. Company has incorporated two subsidiaries 1) Mangalam Speciality Chemicals Private Limited (To handle pharma side business) 2)Mangalam Pooja Stores Private Limited (To handle pious/retail business) . Both are new ventures and can add to turnover and profit (additional capacity is ready). Also most importantly, the perception of the company can be altered to specialty/retail. The numbers from these new divisions have to pick up momentum. Promoters commitment and experience plays a big role here- both of them seem to be in place. Also name change of Campure to Mangalam brands indicates the willingness of the company to launch new products and brands.

Given all these, war time uncertainty has brought up an opportunity to load up a great company at a fair price. The attacking nation is reeling under a lot of pressure from the sanctions and the business impact, now that crude oil price is in its favor - it may be ready for talks and resolution than earlier.

Uncertainty is always a friend of a focused long term investor. Fair valuation is an opportunity to accumulate, IMHO.

Disc: Invested.

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Huge slump (-96%) in Q4-2022 results . EPS only 1.47 when compared with 17.66 last quarter & 38 last year .

The major reason is -

  1. " Change of inventories of finished goods’ work in process and stoek-in-trade "
  2. Other Expenses

Can anyone help me in understanding this further - incase you have additional information .

Inventory build up and pretty high short term borrowing. Seemingly company is utilizing more capacity and not selling that much. Management has to give an explanation on why they were not able to realize the sales in this quarter itself. Looks like its not available in the notes. On the other side, if this is a one time hold up and the company is able to sell the additional production on time , things can looks really good in coming quarters.
Management owes an explanation.

Disc: invested.

It does seem like the company over estimated the demand and had to finance the inventory through short term borrowing. On the positive side GM is back above 50%.
Management doesn’t do concalls or reply to investor queries. Where are you expecting the explanation? Have they given any post result interviews?

@Pratik_Shetty They share investor presentation, but hardly divulge any insights. At least this time, they have to add this vital information. Given the history, management has been honest as far as I know, though reclusive. Keeping investors in the dark is actually a corporate governance catastrophe. I hope the promoters are up to the challenge.

Investor presentation mentions rise of input costs as the broad reason.

@Dr_Kashish rise of input costs - must be referring to the raw material prices and other expenses, but thats about the profitability part. No mention of inventory build up and the financing activity. Clearly management is not providing the full picture. To the least, they don’t want to provide it now.

Latest balance sheet does not look very good. Current Liabilities(mostly short term borrowings) is at 196cr and Current Assets(mostly stuck in inventory) is 340cr of which inventory is 244cr. If they are unable to clear this huge inventory it might be a problem.

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One more quarter of pain likely and this should see clearance in the festive season so around Q3