Hello Sir,
Hope you are doing well.
Sometime back we released our new stock recommendation for our Alpha and Alpha + Members and would like to share with you details on the same.
We focus on growth oriented, owner operated small-mid cap companies that are trading at reasonable valuations and invest with a horizon of 3-4 years.
The latest one fits our framework as it’s a sub 3,000 crore market cap stock, largest player in India in some of the Specialty chemicals it manufactures, introducing new import substitute products, expanded aggressively over the last 4-5 years, has good operating performance track record, started reducing debt and available at only 12.5 times last 5 years average net profit.
Key points about the company:
- Growth – The company has done well with stupendous 8x growth in sales and more than 5x growth in PAT in the last 5-6 years
- Specialty Chemical – The company deals in 3 major chemistries and commands leadership in India with major market share in 2 of those
- Product Diversification – Since FY 17, through organic and inorganic routes, the company has diversified its product mix which has enabled it to serve multiple industries
- Import substitute products – The company has an import substitution opportunity persisting for several of its products. It recently introduced 3 products in the market which are mostly being imported in India with limited availability domestically
- Expanded aggressively – Since FY 19, the company has spent Rs 550 crore + on enhancing capacities and introducing new products to the portfolio. Going forward, the CAPEX spend is likely to be lower with the focus on enhancing efficiencies at the existing plants
- Debt – With strong cash flows from operations, the company reduced net debt by around Rs 90 crore in FY 23. Further, the management doesn’t intend to raise more term loans in near term
- Promoter’s skin in the game – Promoters hold a major stake in the company. Further, as per our analysis, entities related to promoters hold another 20% + stake in the company
What makes the stock interesting from the perspective of next 3-4 years is that the company has started deleveraging the balance sheet, created substantial capacities in the recent past and introduced new import substitution products which should be margin accretive.
Further, due to some exceptional issues it went through in FY 23 and the overall negative sentiment around chemicals space, the stock is down 50% + from the highs, while the business fundamentals have improved; thus, making the stock available at very reasonable valuations of only 12.5 times last 5 years average net profit.
You can get this new recommendation along with other recommendations, by subscribing HERE
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Best Regards,
Ekansh Mittal
Research Analyst
Web: https://www.katalystwealth.
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Name: Ekansh Mittal Email Id: [email protected] Ph: +91 727 5050062
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