Mangalam Organics Ltd. - A promising Pine chemistry story

RajeevJ · December 17, 2018, 4:54pm

Mangalam Organics went into ASM towards the end of October if my memory serves my right. I also gather that the stocks in ASM are reviewed after 60 days so it should logically be coming out of ASM latest by next week.

I think it’s high time the govt. intervened and gave the whole business of ASM a quick burial. As it is small caps have been hurting in the last year or so, and putting the stocks in ASM acts as a needless speed breaker. At least the authorities concerned should use greater discretion when putting those stocks in the ASM category where the share price has risen due to improved financials. I guess the smart thing to do is to use such periods to accumulate the stock. A case in point is that of Birla Cable which corrected from 180+ to 120 levels after the stock went into ASM & is now back to 190.

phreakv6 · December 17, 2018, 5:01pm

https://www.bseindia.com/markets/MarketInfo/DispNoticesNCirculars.aspx?Noticeid={636CE13B-2518-43BB-B395-870EA9524493}&noticeno=20181027-1&dt=10/27/2018&icount=1&totcount=1&flag=0

These are the ASM rules and they seem to have come into effect on Oct 31st. Mangalam Organics is under ASM Stage I, so when it is reviewed after 60 days, subject to it not meeting the criteria for Stage I, it will exit and trade normally. Mangalam Organics doesn’t seem to satisfy the conditions for Entry into ASM in the link above as of today so it should be out when reviewed. I presume this will be in first week of January, assuming it went into ASM on 31st Oct.

bullrun1988 · December 19, 2018, 4:13am

Phreak Sir, Could we know your fundamental points on Mangalam Organic?? Why camphor manufacturer mangalam Organic will get benefited?? Even there are enough organised and unorganised manufacturer available in market.

Pranshinv · December 19, 2018, 9:53am

Pharma-grade Synthetic Camphor Market: Growing Demand for Topical Pain Management Products is Expected to Propel the Growth during 2018 to 2028

Published: Nov 19, 2018

According to the latest research by the company, the global pharma-grade synthetic camphor market size is anticipated to be valued at US$ 532.0 Mn, by 2028 end. The report on pharma-grade synthetic camphor market further projects significant growth potential with average year-on-year growth rate pegged at 4.1% through 2028.

Growing demand for topical pain management products is expected to propel the growth of pharma-grade synthetic camphor market. Pharma-grade synthetic camphor is used in many topical analgesic products such as oils, ointments, chest rubs, and gel. These pharma-grade synthetic camphor pain management products are experiencing significant growth due to lesser side effect compare to oral analgesic and expanded retail channel access. Increasing self-medication rate and availability of cost-effective camphor contained OTC analgesic favors the growth of pharma-grade synthetic camphor market growth.

Growing incidence of infectious diseases such as cold, flu augmented the use of cold sore remedies, nasal decongestants, topical expectorants etc. which in turn would drive the growth of pharma-grade synthetic camphor market. Increasing use of private labeled topical products containing camphor push the demand for pharma-grade synthetic camphor. Private label analgesic is gaining popularity in the U.S. market as they do not require FDA approval and strong promotion activities by retailers. Walgreens Ultra Strength Muscle Rub (4% camphor), Salonpas pain relieving patch (1.2% camphor) are the examples of private label analgesic which contain camphor. Surge in commodity export, economic growth and production capacity are expected to boost the growth of pharma-grade synthetic camphor market.

However, regulatory restrictions on the use of camphor in the medicine of pharmaceutical products would considerably impact the growth of pharma-grade synthetic camphor market. Moreover, increasing raw material prices are expected to hamper the growth of pharma-grade synthetic camphor market. Thus, growing prices of raw materials i.e. alpha pinene or turpentine oil is a major challenge for the manufacturers of pharma-grade synthetic camphor.

Company has segmented the global pharma-grade synthetic camphor market into formulation, application, distribution, and regions. Based on the formulation, pharma-grade synthetic camphor market is segmented into topical and inhalation. The topical segment is expected to represent a highest revenue share in pharma-grade synthetic camphor market as high number of marketed products and vast applications. Applications of pharma-grade synthetic camphor included in the report are respiratory disorders applications, muscular rheumatism, counterirritant & antipruritic and others (topical analgesic, cold sores, minor burns, antifungal, hemorrhoids, topical antitussive & expectorant, astringent, rubefacient, etc.). Others segment expected to contributes highest market value in global pharma-grade synthetic camphor market. Based on the distribution channel, pharma-grade synthetic camphor market is segmented into conventional B2B and online B2B channel. In terms of revenue, conventional B2B segment would hold significant revenue share in pharma-grade synthetic camphor market over the forecast period.

On the basis of region, the global pharma-grade synthetic camphor market has been segmented into North America, Latin America, Western Europe, Eastern Europe, the Asia Pacific excluding China & Japan, China, Japan, and the Middle East & Africa. North America is expected to contribute highest revenue share in global pharma-grade synthetic camphor market. The demand of pharma-grade synthetic camphor has increased in North America, as increasing production of camphor contained private label and OTC products. China is expected to witness the highest growth rate in pharma-grade synthetic camphor market due to presence of the larger number of pharma-grade synthetic camphor manufactures. Pharma-grade synthetic camphor manufactures are mainly concentrated in China and India and they export their chemicals to the U.S. and Europe. Moreover, due to its growing contribution to the global industry, Asia Pacific is emerging as a focused destination for global manufacturers of camphor and related chemicals.

Report tracks some of the key companies operating in the global pharma-grade synthetic camphor market. Representative players included in the global pharma-grade synthetic camphor market report are Merck KGaA, Oriental Aromatics Limited, Saptagir Camphor Limited, Mangalam Organics Limited, Nippon Fine Chemical Co., Ltd., Rochem International, Inc., Spectrum Chemical Mfg. Corp., Aldon Corporation, Prinova Group LLC. and Fengchen Group Co., Ltd. Manufactures are focusing on improvement of the supply chain which expected to provide huge opportunities to them over the forecast period.

RajeevJ · December 19, 2018, 3:22pm

I found this write up in your post quite useful, so putting it as a separate link.

https://www.futuremarketinsights.com/reports/pharma-grade-synthetic-camphor-market

Pranshinv · December 21, 2018, 11:32am

Data extraacted from the report attached herewith CAC minutes of CtoO and CtoE dated_19042018.pdf (685.3 KB)

MAHARASHTRA POLLUTION CONTROL BOARD

As per the Minutes of 9 th Consent Appraisal Committee Meeting of 2017-2018 held on 27.03.2018 at 3.00 p.m. at Room No. 302, 3rd floor, Office of the Hon’ble Minister, Environment, Mantralaya, Mumbai, Maharashtra.

Mangalam Organics Ltd ( Formerly Dujodwala Products)

Based on the presentation, and after due deliberation, committee constitute for product mix cases has recommended the case for change in product mix.

Considering the recommendations of product mix committee, it was decided to grant 1st consent to operate for change in product mix for

Enhancement of production quantity of Camphor (350 MT/M to 550 MT/M), Sodium Acetate (275 MT/M to 500 MT/M) & Alkyl Phenol Formaldehyde Resin (28 MT/M to 50 MT/M),
Reduction of Carene, Lg, DP, Pine Tar, IBA, Camphene, Terpene Chemicals from 465 MT/M to 300 MT/M & Phenolic Resin (166.66 MT/M to 150 MT/M) and
Removal of Alkyd Resin, Furan Resin, Polyster Resin, Polyamide Resin, Ketonic Resin, Paper Sizing Chemicals
Overall total production quantity shall be 1559.66 MT/M.

RajeevJ · December 24, 2018, 4:22am

Great work @Pranshinv.

The change in product mix has clearly helped in improving financials, though to the outside world it appears to be only a case of higher capacity utilization. What can certainly be held against the Co. mgt. is its reluctance to share information on a regular basis. I have also learnt from reliable sources that the Co. is currently in the midst of doubling its capacity so the turnover could double in the coming year 2019-20 with at least the current profitability levels being maintained.

I suspect the mgt. may be looking to up its stake in the Co. before it gets more investor friendly!

HIMSHAH · December 30, 2018, 5:43am

Sir do u have any insight for methanol and chloromethene market. I am asking this as I am tracking TGV SRAAC ( rayalseema alkali). Does camphor has any connectivity in this market .?

gurramlokesh · January 4, 2019, 7:20am

Mangalam is listed on BSE. So it will not be on NSE ASM list.

List of long-term ASM stocks. This is the latest I can find of BSE. It has Mangalam Organics

List_of_Long_Term_ASM_Securities.xlsx (34.4 KB)

phreakv6 · January 4, 2019, 3:17pm

Out of ASM from the 7th of January.

https://www.bseindia.com/markets/MarketInfo/DispNewNoticesCirculars.aspx?page=20190104-35

phreakv6 · January 8, 2019, 4:35pm

Results next week (17th), bit earlier than usual. More clarity should emerge when the numbers are out.

phreakv6 · January 17, 2019, 9:34am

Results are out and they look very good.

Topline up 55% and PAT up almost 7x. Even QoQ, there is very good growth.

https://www.bseindia.com/xml-data/corpfiling/AttachLive/b625cd93-31eb-433a-84f1-5c1b9f6e7774.pdf

It looks like the bottomline number could have been even better if not for this.

This has caused an exceptional item adjustment of about 5.60 Cr to the bottomline. Otherwise this could have been about 32 Cr instead of 26 Cr.

After results, its trading at a TTM P/E of about 7 or so.

Jayatu · January 17, 2019, 9:57am

Yes, very good performance, significant growth in Revenue, OPM and EPS…and best part above all IMO is that price didn’t discounted prior to result …

Vinay_Taparia · January 17, 2019, 12:15pm

Steep rise in employees benefit expenses both on QoQ and YoY basis. Operations seem to be same level as were in previous quarter. Are they hiring for future expansion ?

Akshaykumar · January 17, 2019, 6:01pm

A quick comparison through screener says Kanchi Karpooram is having better ROE, ROCE, less debt high div yield etc but why Mangalam is getting more attention , there might be a reason , please enlighten me.

Prasadkumaresan · January 17, 2019, 6:18pm

Future expansion is just 5 months away. And is the increase in salary of key management personnel add on to employees expenses???

phreakv6 · January 17, 2019, 7:01pm

@Akshaykumar - I think among the camphor players, both Kanchi and Mangalam are pure commodity players while Oriental Aromatics has graduated to a contract manufacturer for aroma chemicals in the fragrance and flavours space. Going by the gross-margin expansion that Mangalam has been showing lately, including this quarter, it is my gut feel that they may not be importing the important RM of Gum Turpentine while Kanchi might be importing this. This may have allowed Mangalam Organics to capture a lot more value, going by the prices of Gum Turpentine.

I think this quarter results of Kanchi will confirm this theory. If Kanchi as well shows similar margin expansion, then it will be because of the ability of these camphor players to pass on RM cost increases (and some) to the end users. In Mangalam’s case, they are also a branded play and seem to be getting significant traction on Amazon for their camphor products and also room freshener product. So overall Mangalam seems to be graduating from a commodity player to a branded play + integrated player + maybe even a contract manufacturer for certain products with their deal with DRT. Better product mix may also have something to do with it, going by their capacity expansion plans posted by someone above. It is very hard to say what it is exactly but good things seem to be happening. I believe this is what is reflected in the P/E of the three players with OAL getting 20+, Mangalam (before this quarter) around 12 and Kanchi around 8.

When it comes to return ratios, it doesn’t just matter what it is at a point in time but the trajectory it is taking. Improvement in RoE from 20 to 30 is a lot more valuable than improvement from 45 to 50 for eg. The return ratios post this financial year should show better numbers for Mangalam. Another thing to notice is the way the managements decided to deal with these windfall profits. One went for issuing warrants while another did a buyback. These small things send strong signals to the market. All this still doesn’t mean Kanchi will do badly. We have to wait and see how this quarter goes for it before figuring out what is happening further. Hope this is useful.

Prasadkumaresan · January 18, 2019, 6:13am

Sir I think you are misunderstanding the process of manufacturing here. Both the companies have the same RM to start with and they do import from other countries.so the basic premise of Kanchi not able to pass on the rise in RM prices is questionable. They had RM stocked at lower prices which gave an extraordinary q1 but after that RM prices have increased which led to fall in margins to 15 pc which is the margin they were making before. So with rupee appreciating I think Kanchi should be able to maintain a better margin than q2. And as explained Mangalam has expanded into value added products which are high value products as u explained

browser|585x500

ValueInvstr · January 27, 2019, 1:08pm

Mangalam Organics Ltd produces the following variants of Phenolic Resin:

(i) TERPENE PHENOLIC RESIN DRT-70/90/100 , (ii) ALKYL PHENOLIC RESIN DRT-4001/4002/4015/4007 , and (iii) ALKYL PHENOLIC RESIN DRT-4003/4004.

If this is the result of supply and distribution alliance entered into with DRT, then MOL seems to have started supplying phenolic resins to DRT for distribution in the global markets, though it cannot be validated as the break-up of revenue into product segments is not made available by the company.

The management sounds confident of generating high revenue and profitability from this product line. If all goes well with this product line as envisioned by both MOL and DRT, it may turn out to be an interesting theme to play. At present, MOL’s heavy dependence on camphor(almost 80% of total revenue) is what makes it vulnerable to industry headwinds and cyclicality. China may bounce back any time if the current equation of demand supply gap persists for too long.

Synthetic resins market being tapped by MOL under strategic collaboration with DRT to reach out to global clients across industries may help it reduce dependence on camphor significantly and it may result in rerating of the business manifold. Now it remains to be seen how it all happens over the next couple of quarters.

rupaniamit · January 27, 2019, 7:24pm

@ValueInvstr - Sorry if I missed this - can you please share something which confirms that management sounds confident of generating high revenue and profitability from above mentioned 3 resin products/lines.