Valuations of meghmani organics seems to be lowest among the peers.
Is there any peer comparison done? can someone post it pls.
Thank you
Hello,
Any recent bad news? Stock is just going down almost everyday?
Promotors selling their shares? Today, I noticed multiple large sell qtys (75000 + 100000).
Thanks.
Promoter selling would have been reported under Insider trading regulations, if any.
In fact, the promoters bought stake from market in Aug-Sep period & I blv that was at higher than current price.
Company announces plans to set up new pigment plant. @Ankit_Bahuguna your guess on the color is spot on…its white. Details below
Disc: Invested prior to the demerger
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Yes, actually i thought which colour i would prefer if i was in their place 
Notes from Concall:
- Demand for white pigment/color seems to be high compared with all other colors (infact higher than the demand of all colors put together). This will be an import substitute.
- Capex of 400cr and will be ready by Q1FY24
- EBITA (25%) will be much higher than current pigment/colors (vs 13-14%). Combined EBITA after white pigment will be approx. 17-18%.
- Expected 700cr on topline
- Only few/small domestic players and couple of them being PSUs
- Most of the current demand (white color) is fulfilled through imports from China, US, Australia, etc.
- Technology partner not revealed, however they are confident on the technology and it is a proven one.
- They are planning to spin a new subsidiary for this new capex to take advantage of tax benefits. But it is not confirmed.
- After commissioning, they will plan to further increase the capacity based on the demand and market sentiments
Questions
- Is market ignoring/rejecting these plans? Any issues which we are not seeing? I was expecting this news would be a good trigger for the stock, however it didn’t.
- If they are planning to have a new subsidiary for this capex. Does it mean they will move all pigment business to this one?
- Though it is too early to think, can we expect another demerger splitting pigment and agrochemicals?
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Stock is down may be by FPI selling (as volumes are high) but promoter is buying
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Revenue growth momentum is expected to sustain over the medium term as well driven by commissioning of a multi-purpose plant (MPP) in fiscal 2023 and a new product line for Titanium Di-Oxide (TiO2) in the pigments division by fiscal 2024. Estimated cost for these projects stands at around Rs. 700 crore (~Rs. 310 crore for MPP project and ~Rs. 400 crore for TiO2 project) expected to be funded in debt equity ratio of 1:1. Work on the MPP plant has already started and is expected to be commissioned by first quarter of fiscal 2023. This plant with a revenue potential of around Rs 600 crore per annum would help the agrochemical division cross revenues of Rs. 2,000 crore over the next 2.5-3 years. The expansion announced for the TiO2 plant is likely to be commissioned by fiscal 2024 and will also add significant scale to the pigments division. Operating margins are expected to remain healthy in the range of 16-18% over the medium term driven by higher operating leverage and integrated nature of operations. Strong realizations and stable input prices had resulted in operating margin reaching historical highs of over 19% in fiscal 2021.
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Notes from exchange filings
Company has received the possession of Kilburn Chemicals Limited (including it’s manufacturing unit at Dahej) on December 24, 2021. Company has diversified its Pigment Division’s product offering with Kilburn Chemicals acquisition, fast-tracking its foray into Titanium Dioxide (TiO2).
Kilburn Chemicals Limited plant is located at Dahej, Gujarat and its existing Titanium Dioxide (TiO.) manufacturing capacity is pegged at 16,500 metric tons per annum (MTPA).
The annual demand for Titanium Dioxide (TiO,) in India stands at 2,50,000 MTPA and is growing at 4.2% CAGR. Imports meet nearly 80% of India’s Titanium Dioxide (TiO;) demand. The Titanium Dioxide (TiO2) production capacity in India is pegged at 81,000 MTPA.
Disc:- Invested. No Reg. Advisor.
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While India seems to be in deficit of TiO2 and is reliant on imports, domestic TiO2 companies do not seem to be prospering from this supply shortage. Margins of Cochin Minerals has come down from 10% to 3% (If I remember well they were in a litigation with the Kerala Govt on the ownership of mines and eventually lost the court case) which I am supposing is due to the lack of raw material needed for TiO2 and Kilburn Chemicals eventually went bankrupt. Given that Meghmani’s TiO2 announcement has created a lot of hype, would like to understand how the scenario is going to be different for Meghmani. And, if the margins are going to be stable in the long-run?
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It does not seem India is short of the TiO2 RM(Ilmenite) . Look at this 2020 article …
How can Indian paint industry stop relying on imports of raw materials from China - The Week
“The paint industry are forced rely heavily on China for supplies. Of the world Ilmenite production of 175 lakh tonnes, India exported 11 lakh tonnes Ilmenite. Ti02 (produced from Ilmenite), required by the paint industry, India’s production was at 0.50 lakh tonnes against a domestic demand of 2.20 lakh tonnes. This means that India had the raw material for producing TiO2 but preferred importing it.”
In the Concall (365th post in this thread)as well, management says that RM sourcing is no problem as its available in domestic market or can be imported as well. It looks like, its a case of Chinese oversupply and no anti-dumping duty that makes it unviable for Desi producers .There is 11% import duty but that is not enough. I think , the idea is to use a better process to bridge this gap and produce cheaper than the existing domestic manufacturers .
Infact , that Concall is very illuminating … Gets better towards the end. 
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@Ghonarbochon Thank you for sharing your views. Based on the article you’ve shared and others that I found on the internet, leases of private mining companies have been prematurely terminated post a policy 2019. Looks like IREL has been given the permission to mine recently but it is uncertain if Meghmani can benefit from it. If there is a domestic raw material shortage then I have a feeling that it’s going to affect the margins. I was looking at the ilmenite ore price chart and the prices have doubled in the last year. The article you’ve shared also mentions about the volatility of the TiO2 prices. That said, there are no free lunches and the companies that sail these challenges will get valued high by the market. I am just curious how Meghmani is going to address these challenges. As suggested, I will go through the concall to see if it answers any of these questions.
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Amazed by the Product Knowledge/Interest from Transcripts
Ayush Agarwal: My last question is on Flubendiamide. I was reading about the molecule, and I think it stilldoes not have registration in the US. I believe the roll was cancelled, so I would like tounderstand the potential market size of Flubendiamide and do we have contracts with theMNCs we want to supply to?
Ankit Patel: We initially target Flubendiamide from the Indian market point of view. It is a vast product inIndia, and we are the first and only company to get a manufacturing license from the CIB. Wehave already started the commercial production for Flubendiamide. You can say other companies like Bayer and all they are importing. They are notmanufacturing in India. So, weare the first Indian company, and as far as the export is a concern, we are working on various other markets where we can sell this product.
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I had some questions for MO regulars, if you could kindly illuminate.
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From recent AR, it appears that much of the revenue growth in MO comes from the tailwinds in the agrochem segment (more specifically, latin america and north america). I also own UPL and from their AR, the burgeoning demand in the americas is evident. Most of MO agchem products appear to be postpatent. My question is - what exactly are the competitive advantages of MO in existing products and upcoming products. Does UPL not make these products? If China + 1 trend fails, does it mean suppliers in china can outcompete MO? Are MO agchem revenues sufficiently geographically diversified?
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In the pigment (blue and green), is there competitive pressure from China? What is the 5 to 7 year expectation of revenue growth in this segment?
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titania production is a bold move for MO. If anybody has a technical know how, how difficult is this process and why is it that no indian manufacturer has succeeded yet despite the market opportunity?
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13.09.2022 (ET interview)
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In agchem, Europe exposure is <5%, most exposure is to Asia, Latin America and USA
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In pigment division, Europe exposure is 10-12%
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Dahej multi-purpose plant will get commissioned in Q3 and is in discussion with a MNC client for supplies from this plant (capex of 350 cr.). Contribution will start from Q4 and expect 600 cr.+ topline contribution in FY24
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Expect growth rate of 20%+ in next 3-4 years
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Logistics costs have softened, will see 2-2.5% contraction in EBITDA margins
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Expect 22%+ EBITDA margins in titanium dioxide (expect pigment division margins to increase from 12% to 15% with ramp up in titanium dioxide capacity)
Disclosure: Not invested (no transactions in last-30 days)
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I have been following this company for sometime now and I feel they have done really well in terms of execution and scaling up of the agrochemical business in last 3-4 years. I think most of the people don’t look at this co due to past issues but I feel that some of those were mistakes which management has agreed to (also some issues are to traditional pigment business which is stagnant) and now the next generation is more involved and perhaps bringing the change. If the issues were so then why market is giving such high valuations to MFL and not to MOL. Both the cos operate out of the same office and work together.
Also, the company has been continuously investing in capex and has a good roadmap for growth starting from FY24. If they can again execute it well, maybe the stock can do well in 2-3 years given the low valuations as a starting point.
Disc: invested in family and client acs.
PS: after very strong performance in recent qtrs, the commentary in concall of Q1FY23 was weak. maybe near term performance maybe weak.
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I like this analogy. chor bane more really happening here.