Hope you are doing well.
There are so many potential investment opportunities around; however one does have to keep running various screens and put in great number of hours researching stocks.
Recently, we came across Chemfab Alkalis which is a major Caustic soda maker. The numbers looked decent and we decided to dig deeper. Below, we have shared notes from the Care credit rating report on the company.
Hope you find the details useful in your search of investment opportunities.
It's a minerals processing company, largest in its segment, has captive raw material sources, grown PAT by ~300% in the last few years, de-leveraging balance sheet, 2nd generation promoters and available at only ~6 times post-tax earnings.
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Chemfab Alkalis - Notes from Oct'21 CARE Rating report
- Chemfab Alkalis Limited has been operational since 1983. Teamec acquired Chemfab Alkalis Limited (CAL) with effect from March 30, 2017, and subsequently changed its name to CAL in July 2017
- CAL’s day-to-day operations are managed by Mr V M Srinivasan, CEO of the company
- As of Apr'21, CAL had an installed capacity of 155 TPD of caustic soda in Pondicherry and 6000 MTPA of PVCO-Pipes Plant in Sricity (Andhra Pradesh). CAL also produces chlorine, hydrogen, sodium hypo chlorite, and hydro chloric acid as by-products from manufacture of caustic soda
- The company’s Pondicherry plant has a track record of 35 years in the production of caustic soda. Capacity utilization levels have increased from 83-85% levels till FY 20 to 96% in FY 21
- The company commenced the operation of PVC - O (Molecularly Oriented Poly Vinyl Chloride) – Pipe production line in Sricity, Andhra Pradesh, from December 2018
- The company derives around 75% of its income from Chlor-alkali segment and the rest is derived from the PVC-O pipes segment
- CAL’s chlor-alkali finds application across various industries like textiles, FMCG, alumina, petrochemicals, acids & chemicals, pharmaceutical and paper industries
- The company’s major customers in PVC – O pipes segment currently are from the private sector, mainly farmers’ associations for irrigation projects and the company can supply its pipes to EPC contractors who are undertaking water supply-related government projects as well
- A major parameter determining the profitability for caustic soda division apart from prices, is the power cost. CAL’s power supply is fairly stable and cost is lower owing reliance on the grid power from the Union Territory of Puducherry
- CAPEX details
- The company has concluded the projects for expansion of caustic soda from 125 TPD to 155 TPD in April 2021 and expansion of second line of PVC-O pipes plant to 6000 MT in March 2021
- The company is going to expand its caustic soda further to 200 TPD with a cost of about Rs 25 crore which will conclude in FY 22
- The company has further plans to expand the caustic soda plant to 300 TPD, which is contingent on receipt of approvals. The cost for this is expected to be around Rs 70-75 crore
- On the PVC pipes segment, the company plans on putting up one more line of 3000 MTPA of O-PVC pipes which is also contingent on the absorption of the existing capacity of 6000 MT
- Project under wholly-owned subsidiary: The company is planning to set-up an integrated greenfield project in Karaikal under its wholly-owned subsidiary, Chemfab Alkalis Karaikal Limited (CAKL). The project envisages 200 TPD caustic soda capacity along desalination plant and production of chlorine derivative (aluminium chloride)
- The project is to be implemented in phases with Aluminum Chloride unit to be set up in the first phase with a capacity of 10000 TPA. The first phase of aluminium chloride plant is about Rs 50 crore which is expected to be commissioned Q3 FY 23
- The total project cost is expected to be around Rs 350 crore out of which about 20% is to be funded through equity and rest through debt
Disclaimer: This is not a recommendation to buy/sell Chemfab Alkalis. These notes are as announced by the companies on exchanges and only for the purpose of information and education.
SEBI Research Analyst Registration No. INH100001690
Research Analyst Details
Name: Ekansh Mittal Email Id: [email protected] Ph: +91 727 5050062
Details of Associate: Not Applicable
Analyst Certification: The Analyst certify (ies) that the views expressed herein accurately reflect his (their) personal view(s) about the subject security (ies) and issuer(s) and that no part of his (their) compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report.
The views expressed are based solely on information available publicly and believed to be true. Investors are advised to independently evaluate the market conditions/risks involved before making any investment decision
This report is for the personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. Ekansh Mittal/Mittal Consulting/Katalyst Wealth is not soliciting any action based upon it. This report is not for public distribution and has been furnished to you solely for your information and should not be reproduced or redistributed to any other person in any form. This document is provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. Ekansh Mittal or any of its affiliates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Neither Ekansh Mittal, nor its employees, agents nor representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. Ekansh Mittal/Mittal Consulting or any of its affiliates or employees do not provide, at any time, any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of merchantability, fitness for a particular purpose, and non-infringement.
The recipients of this report should rely on their own investigations. Ekansh Mittal/Mittal Consulting and/or its affiliates and/or employees may have interests/ positions, financial or otherwise in the securities mentioned in this report. Mittal Consulting has incorporated adequate disclosures in this document. This should, however, not be treated as endorsement of the views expressed in the report.
We submit that no material disciplinary action has been taken on Ekansh Mittal by any regulatory authority impacting Equity Research Analysis.
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Whether the research analyst or research entity or his associate or his relative has any financial interest in the subject company/companies and the nature of such financial interest – No
Whether the research analyst or research entity or his associates or his relatives have actual/beneficial ownership of 1% or more securities of the subject company (at the end of the month immediately preceding the date of publication of the research report or date of the public appearance) – No
Whether the research analyst or research entity or his associate or his relative has any other material conflict of interest at the time of publication of the research report or at the time of public appearance – No
Whether it or its associates have received any compensation from the subject company in the past twelve months – No
Whether it or its associates have managed or co-managed public offering of securities for the subject company in the past 12 months – No
Whether it or its associates have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past 12 months – No
Whether it or its associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past 12 months – No
Whether the subject company is or was a client during twelve months preceding the date of distribution of the research report and the types of services provided – No
Whether the research analyst has served as an officer, director or employee of the subject company – No
Whether the research analyst or research entity has been engaged in market making activity for the subject company – No