Akshar Chemicals...Speciality Chemicals (Vinyl Sulphone)

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Company Name: Akshar Chemicals (BSE Code: 524598)

Industry: Speciality Chemicals

Investment Horizon: At least 2 Years

Allocation: Allocate not more than 10% of your portfolio, at a CMP of 850 Range it is a value buy and can add on dips too

About the Company:

The Company was promoted by Mrs. Paru M. Jaykrishna in 1989. It is headquartered in the chemical belt of Mehsana (Gujarat). It is engaged in the business of dyes and pigments manufacturing.

Business Segments:

Dye Intermediaries – (Includes Vinyl Sulphone) – Used in Textiles – Cotton, Silk, Wool
Dyes – Same as above
Pigments – Used in Paint Industry, Plastics etc.

Vinyl Sulphone has contributed to 68% of revenues and CPC green business contributed to 32% of revenues in FY 17

It Produces 9240 Metric tonnes of Vinyl Sulphone and 1440 Metric tonnes of CPC green pigment

Pros and Notable Points:

  • One of the fastest growing vinyl sulphone manufacturers in India and India’s leading exporters of vinyl sulphone.
  • It has almost have 45% market share in Indian Vinyl sulphone exports
  • With the intent to control the pollution, the Chinese government taken an initiation of shutting down of the biggest Chemical Manufacture company (Hubei Chuyuan) and some other companies in China which contributes more than 30% of Global Dye production – Which led to shortage of products in the markets
  • Simple Demand and Price concept again – Demand increased and Prices also increased simultaneously. The Chemical prices have gone up by more than 100% to which resulted in tremendous increase in top line in terms of both price growth and Volume growth
  • But that only has reflected in only two Quarters i.e. Sep 16 and Dec 16 and cooled in next quarters due to seasonal effect and increase in Crude oil prices
  • And maybe it will take some time for Chinese companies to recover
  • Received many awards for Outstanding export performance in Merchant Exporters Panel
  • Promoter holding is at 70%
  • DIC Corporation of Japan has 2.9% stake in this company
  • Credit Rating of A1 from CARE and ISO certifications like ISO 9001: 2008

Check Goa Carbon up 40% in just two weeks

Cons:

  • Volatility of Commodity prices
  • A Little highly priced over peers

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Financial Highlights:

  • Revenues are grown at a CAGR of 38% from past 5 years
  • Profit after tax has grown at 85% from past five years
  • Return on Equity for past three years stood at 34% and Return on Capital Employed stood at 48%
  • Debt for the Company is Rs.30 Cr which is just 50% of FY 17 Net profits and the Debt Equity is at 0.3
  • With Fixed assets of Rs.50 Cr, the company is able to generate bottom line of Rs.50Cr in FY 17 which demonstrates the operational efficiency of the company – Capacity utilisation during the year was 80%
  • Company is exporting almost 90% of its sales
  • Dividend Pay-out ratio is 35%
  • Had a Capital expenditure plan of up to Rs.175 Cr – for backward integration of the CPC green business and going for aggressive expansions
  • The Company has low equity base of just Rs.7 Cr



Narration
2012
2013
2014
2015
2016
2017
Sales
            51.89
            95.83
          144.87
          199.82
          187.71
          259.79
Expenses
            53.70
            89.73
          113.75
          172.53
          155.48
          180.16
Op Profit
            (1.81)
              6.10
            31.12
            27.29
            32.23
            79.63
OPM
            (3.49)
              6.37
            21.48
            13.66
            17.17
            30.65
Net profit
            (3.89)
              3.79
            20.04
            16.00
            16.64
            51.93
EPS
            (7.85)
              7.65
            40.46
            21.88
            22.75
            71.59
Price to earning
            (2.82)
              3.56
              3.28
              6.65
              9.72
            11.67
Price
            22.11
            27.25
          132.88
          145.59
          221.25
          835.55

Management:
  • Mrs. Paru M. Jaykrishna -- Founder, Chairperson and Managing Director
  • Mr. Gautam M. Jain
  • Mr. Jayprakash M. Patel
  • Mr. Param J. Shah
  • Dr. Pradeep Jha
  • Mr. Kiran J. Mehta
  • Mr. Gokul M. Jaykrishna
  • Mr. Munjal M. Jaykrishna - Joint Managing Director & CFO

Rating:
  • Technical Rating – 69
  • Fundamental Rating – 76
  • Overall rating -- 73

Valuation:  

With the investment horizon given, considering all the inputs of estimates the valuations are at Rs.2250

Valuations are made at 11X projected FY 20 EPS

(The valuations are calculated on the basis of financial inputs/estimates but investors are required to invest based on the business potential and business risks too) 

This is a cyclical stock, once it has got a momentum – no one can stop the ride

Note: Some of the information mentioned here is obtained through company website, annual reports

ANNUAL REPORT FY 16 

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