Meghmani Organics Ltd


Meghmani Organics Lts. (MOL) is in to the business of manufacturing and marketing of pigments and pesticides. Product range is visibly good.

4 manufacturing plants located at Gujarat. Marketing team in 15 states which has been increased in 17 last year. More than 1000 stockist in India.

Warehouse located at Belgium, Uruguay, China, Russia, Germany, USA. Offices at Belgium, China and USA. More than 20 stockist overseas.

Overall they have 200+ customers of pigments and 90+ of pesticides.

Application of pigments: printing inks, plastics, rubber, paint, textile, leather, paper etc

Application of pesticides: Farming community, pest control, termites in wood etc

Promoters holding marginally increased from 50.36% to 50.67%

CMP 15.80, book value 21, EPS decreased drastically in last 5 years but doubled comparing to last year, D/E 0.68, Net profit has doubled from last year but almost 1/5th comparing 5 years.

Last year shifting of a plant took some toll on the production outcome, which has been successfully completed. All environmental norms has been fulfilled last year and this year they have announced to launch 3 more generic products and registration of new products in overseas market.

Company is technically very sound and has own R&D department. Management is well experienced.

Possible Risks: Adverse rain, Low awareness among farmers (as low as 30%)- positice sign as there is much room for market penetration, input cost (for this they have done some long term tie ups with the distributors), any policy change by govt. which will affect the currency. Apart from this major risk, according to me, is Genetically Modified (GM) seeds. I don’t know what is the new govt’s take on GM products but I am sure it will not be accepted by many and won’t happen anytime soon.

I request experts and seniors here to add their views and comment on the aspects of cash flow and balance sheet.


Unlike other picks of Daljeet(DK), this hasn’t gone anywhere in months. On a lighter note, The other reason can be that I have bought some qty and that can be the reason ( usually, it happens to me… All I have to do to stop a rally in any stock, buy qty!!).

The triggers sited by DK are for all to see ( I think conviction in such turn around stories ( esp when Eps tanks to 20%) will come only with consistency in results. Q2/Q3 performance and not getting into any other environment issue is the key for movement in this stock.

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Plus, ever up move from here will get sold into and it will test the patience.

Plus, ever up move from here will get sold into and it will test the patience.

Kalyan: Thank you. Although I never bought anything that has been recommended by DK, but here the conviction seems to be on a higher side. The downside is limited. I would wait for other VPs to give some insights as I am not well versed with the tid bits of balance sheets.

“All I have to do to stop a rally in any stock, buy qty” I literally laughed at this. It happens with me as well. :smiley:

Looks like a value trap to me - please look at RoE and ROCE over a decade - the company hardly recovers cost of capital -

What’s the big story here ? the best case ROCE seems to be 12-13% during the go-go years of 2006-07. Besides, Sabero has been bought over by Murugappas and is on a roll - Murugappas are masters of this game and my sense is that it is too early to tell if it is sustainable. As always, I prefer to rely on primary research and scuttlebutt to confirm/not confirm.

At a present Mcap, based on an APAT of Rs. 30 Cr. for FY 15, the valuation works out to 13-14 x FY 15 EPS (note: please knock off minority interests), which seems fairly valued IMHO.

Also, note the rise in input prices - EPS was 0.3 in Q1 FY15, much below what it was before the troubles began in FY 12-13.

Run the numbers and the thesis looks quite not so logical - RM prices have gone up 4 x and Q1 margins have shrunk and yet the DK report talks about margin expansion in FY 15 and debt reduction. It could happen but the way I look at turn arounds is that I won’t invest until I see some proof of the turnaround happening. Merely hoping for the turnaround is not a proof of a turnaround in my book.

I have respect for DK but IMHO, he shoots too frequently (2-3 ideas a week) without thinking through the margin of safety and if his hypothesis is holding water.

Counter views always welcome,


@varadharajan Raghunathan. I am impressed by your posts and yes it isn’t easy to get past your scrutiny. I am just curious. What is in your PF ? And what u plan to buy or at least evaluate? That will be the indeed a Fort Knox PF !! Coming to Megh, I agree. Upside is still limited until margin expansion is proven and that is what is in my earlier post too


I wasn’t this picky until a while back but a life threatening incident happened out of a fraud company I found out on and ever since then I have decided that I won’t touch a stock until I am sure there are at least 7-8 solid tick marks (and those have to be first hand ticked myself - not because someone else has said so) and most importantly, no threat to my life !!. I intend to write a book on it soon enough !!

I look for stocks which can be both PE re-rated and can grow EPS at 25-30%. The only two stocks I bought in the last three months were HIL (you can read the post in VP-er) , avanti feeds and oriental carbon all of which I have huge conviction on and I have got first hand ref checks on the promoters/management. I can’t tell you how much of a difference it makes - I know of at least 2-3 companies where numbers look good and just a casual check with channel/competitor tells you a diametrically opposite view and then you wonder " ah. how could I be so naive to believe stuff at the face of it…"

I just joined VP-er a month back and I can tell you I am incredibly fortunate and grateful to be a part of this - there is so much to learn every minute. I really hope I can contribute my little 2 cents too.


Thank you Varadharajan…

Good thing is I m learning so much on daily basis from the VPs… Bad thing is I am not able to evaluate companies properly…


You never know who’s right until passage of time. It’s not whether you are right or wrong that matters - but if you make money. You could make money being wrong and you could lose money being right.

I am sure you are doing fine here - for all I know, meghmani could be a multi-bagger. Let’s just keep an open mind and learn from facts and inferences.


Yes, I am sitting on a decent profit and will hold it for a while before adding more.

guys anyone have gone through FY15 annual report?? Just want to have a view on Consol cash flow statement…

snapshot of consol cash flow statement from FY15 AR

I am interested in FCF…FY15 OCF is Rs 252cr and Net Capex (Purchase-Sale of FA) is Rs 46cr…that brings FCF for FY15 at Rs 206cr vs Mcap of Rs 548cr…FCF yield is c38%!!! such a high FCF yield? For FY14, FCF is Rs 61cr that is 11% FCF yield at current price…and if I take a year ago price of 16 bucks, yield works out at c15%… am I missing something here?

Annual report is very informative and encouraging on growth as well as debt reduction plan of the management…

Disclosure - invested a small portion for tracking

Meghmani has been posting decent nos. from last several quarters.

With TTM PEx of 7.65, its looking attractive. Debt has been a problem but management has been reducing steadily, as clearly evident from reduced finance costs. Looks like a good candidate for long term as PE re-rating and good growth on cards.

Management is positive about growth in topline and improved bottomline going forward. Reduced oil prices is resulting in raw material costs and is clearly reflecting in the bottomline.

Q3 nos.

Management Commentary:

Disc: Invested and planning to add more

Good performance in Meghmani continues. The stock has almost doubled since my last post. Management has walked the talk and now the margins have been consitently showing uptrend. D/E now stands at 0.75.

YoY nos.

Total Income—1355.93cr vs 1294.20cr…Total Expenses…1145.82cr vs 1165.82cr…Other Income…3.90cr vs 6.41cr…PAT…113.02cr vs 45.98cr…EPS.3.25 vs 1.73…Big jump in EBITDA margin is a very good sign for bright days ahead…

At CMP of 38, the stock is trading at 11.7x FY16 earnings.

Investor presentation Feb16

Disc: Invested from lower levels

Meghmani Update:

Expect topline growth of Rs 300 cr in FY17: Meghmani Organics

Result presentation for FY16

There are 2 new updates in this counter which can effect the price:

  1. Akzo Nobel eyes stake 25% stake in Meghmani Organics arm - Meghmani Finechem. #ETNOWExclusive

This 25% is currently held by IFC and a sale will value meghmani finechem @ 2K CR which is more than MOL current value.



  1. There was fire reported in one of the plants operated by meghmani. The extent of loss is not yet known but according to management will be quite less and there will no revenue loss as the same chemical is made 3 more location.

Total Revenue from the plant which has 4 sectors = 200 CR / year and the sector that caught fire contributes 40 -45 CR / years …

Conversation with the promoter:

This stock still is deprived of any Mutual holding and i believe re-rating is on the cards.

disc: Owning the stock since 2013.

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MEGHMANI ORGANICS Q1: Cons EBITDA at â‚ą74.9 cr vs â‚ą44.8 cr, up 67.2% YoY

MEGHMANI ORGANICS Q1: Cons Income from ops at â‚ą360.5 cr vs â‚ą309 cr, up 16.7% YoY

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2 RED FLAGS while Reading the Annual Report ending March 2016

  1. NET Cash outlay is NEGATIVE FOR STANDALONE AND FOR consolidated negative for the past 2 years.

  2. Huge LOSS in derivatives.

New Report published by Dynamic level:

Disc: Invested


Can someone share the transcript of the investor meeting held on 23 August?

Thanks in Advance.