Oriental Aromatics (Earlier: Camphor & Allied Products Ltd)

Decent Q4 numbers.

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Seems poor results to me as margins have really come down. Management commentary would be important.

Management had already clarified in several previous concalls that 17-18% OPM is sustainable.

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From AR 2021, provision for bad debts has increased 3 fold - from 27 to 95, legal & prof expenses have grown by 200 Crs, sales promotion expenses have gone down from 105 to 67, Inventory has increased while write down of inventory (reflected in raw material consumption) has increased because of aging, liquidation and realizable value. These seem to be concerning given that industry is a slow grower and companies are price-takers - any insights?

Privi Speciality Chemicals is also able to maintain margins of 17%. How does Oriental compare? Both companies focus on aroma speciality chemicals

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And how come you say that this business is price takers? Does it controlled by any tariff norms under any board? Can you please tell me.

Flavor and Fragrance Sector Analysis_ E…pdf (2.2 MB)

Refer attached overview of the sector. It talks about slow growing industry and pricing power

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Last 11 yrs cummulative PAT=400 cr around
Last 11 yrs cummulative CFO=300 cr

I think about 25% CFO is stuck in reveivables

Last few yrs receivables

receivables as % of sales
2021=26.65%
2020=20%
2019=21%
2018=26%
2017=22%
2016=22%
2015=22%

Inventory as % of sales
2021=32%
2020=21%
2019=27%
2018=26%
2017=25%
2016=20%
2015=23%

Form 2010 to 2020

cPAT=298cr

cCFO=281cr

There is sudden jump in receivables in 2021 and 2018.

There is sudden jump in inventory in 2021.

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Does anyone have link to investor meet held yesterday?

Disc: Invested

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http://www.orientalaromatics.com/corporate-announcements/ErnPresSep21.pdf

pdf of investor presentation

Q3FY22 Results - https://www.bseindia.com/xml-data/corpfiling/AttachLive/e56e0f52-cb1f-42b0-9aeb-a7b631672691.pdf

  • Cost of materials consumed as a % of expenses is ~81% which is generally in the 60s range hence a sharp decline in margins and profits.
  • Revenue is more or less the same which was expected as 1) no new plant was ready to give additional sales in Q3 and 2) high capacity utilize. of almost all facilities.

Overall, not a good set of numbers.

Disc. - Invested

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OAL has got the EC for their Greenfield project expansion at Mahad.

As per earlier con calls, this was supposed to be attained in Q3FY21 but got delayed due to COVID and whatnot.

About the Mahad CAPEX -

  • Investment of ~200-250 crores. Will be a combination of certain Turpene chemicals and certain standalone plants for single products.
  • A camphor unit will also be set up in Mahad, which gives geographical de-risking for camphor.
  • It will be a zero liquid discharge plant from day one
  • As per the management, all technology, ordering of machines and background work has been done, so I believe the plant should get completed in or before Q4FY22.

Disc. - Invested

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Any specifi reasons why company is 15% up a day?

Anyone tracking this?

There is an overcapacity for Indian domestic market for camphor. Since camphor and related business comprises ~30% of OAL, it has moved to a wait and watch position.

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Anyone tracking OAL fundamentally and sees an opportunity?? Please comment

I recently bought it my thesis on it is their net fix is increased from 270 to 443 they normally get net fixed turn over of 3 which makes a sale of 1329
Took 15 percentage as a margin finally doing all the thing got 120 of net profit as per my target I can give 3-4 year for cycle to play took forward exit pe of 25 it can give 18 to 25 percentage of return , second it also gives a technical entry to. plz share your thoughts

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