Food color gives consumers an almost immediate impression about the freshness, flavor and quality of a product and is thus a very important constituent of any food item.
Dynemic Products is one of the largest manufacturer and exporter of synthetic food colors and today we will briefly look at this company.
In fact, we have worked on this stock in the past and recommended it to our Alpha and Alpha + members in Mar’16 around 47 odd levels and also closed it around 140 in Jun’17.
After we closed the coverage, the stock went up to 700. But after touching 700 in Oct’21, the stock is down 60% since then and currently trading around 280-290.
Looking at the correction and Promoter’s name in Insider Buying list, we decided to dig deeper.
Important Update: Recently, we recommended a new stock to our Alpha and Alpha + members
The company is into Online Retail business with very high operating leverage and attractive valuations.
We like good companies going through a temporary bad phase because valuations tend to be reasonable and once the cycle turns the stock goes through a series of both earnings and valuations re-rating. You can read all about this new recommendation HERE
Dynemic Products – Notes from Investors presentation and Annual Report
General Points
- 1998 – diversified in food colors industry
- 2000 – Acquired Saffron Dyestuff and Established 2nd manufacturing facility for Food Colors
- 2008 – Completed Expansion at Unit 1& 2
- 2014 – Acquired land at Dahej for new manufacturing facility
- 2021 – Completed Dahej plant
Product overview
- Food colors – Water Soluble Color, use in Beverages, Animal Feeds, Dairy Products, Toothpaste etc.
- Lake colors – Water Insoluble Color, use in Pharmaceuticals, Cosmetic & Personal Care Products, Bakery Products etc.
- FD&C colors – US FDA Certified Colors, Use in Food, Pharmaceutical and Cosmetics products
- Salt free dyes – Special dyes Inkjet Industry, Use in Cartridge Ink, Roller Ball point Ink etc.
- Dye intermediates – Chemicals / raw material for Food Colors, Paper Dyes, Textile Dyes etc.
Backward and Forward integration
- Dye intermediate – By backward integration, at Plant 3 we are going to produce major raw material of Food Colors by our own
- Food colors – Producing Complete range of Synthetic Food Colors in Powder, Granular and in Liquid Form
- Lake colors – Forward Integration : By using Food Colors, we are making Lake Colors
Capacity expansion
- Till FY 21, the company had food colors production capacity of ~3,000 MTPA
- With the commissioning of Dahej Plant the production capacity of Food colors is 6,120 MTPA and Dye intermediates 16,524 MTPA
Management view on performance
- Debt Reduction: The company has managed to repay about 70% of its Rs 139.23 crore term loan by December 2024, which indicates good debt management and financial health
- EBITDA Improvement: The EBITDA margin has improved to 13.01% in YTD 24-25 compared to 10.60% in YTD 23-24. This is due to higher capacity utilization and increased revenue. With continued growth in production and sales, EBITDA is expected to keep improving
- Production Capacity: The company’s production capacity of 22,644 MT per annum gives a strong foundation to meet current and future demands, enhancing ability to scale operations
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Disclaimer: This is not a recommendation to buy/sell any of the stocks mentioned above. The securities quoted are for illustration only and are not recommendatory.
Ekansh Mittal
Research Analyst
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