Bhageria Industries
11 Mar 2018
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Topline
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Expected To be ready for new capacity is added.
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Operating margin%
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@ 22% To remain flat or decrease
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PE
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@ 11 Expected to be flat or decrease
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Year
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event
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Jan 2018
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--Company has fully commissioned 30MW solar power plant at Ahmednagar, Maharashtra. Bhageria was awarded the contract by the Solar Energy Corporation of India (SECI) for 25 years at a fixed tariff of ₹ 4.41 / unit.
--Revenue from Solar business at ₹ 7.4 cr @ full commissioning of the solar power plant
--95 cr loan from EXIM bank for this. On dec 2016
- Risk : If the market price of solar power tariff Continues to fall Further or even if it stays at current levels of ₹ 2:44 per unit and does not increase, then there is a probability did Bhageria Industries Limited might have to face similar situation of tariff renegotiation or lower purchase of power by utility companies.
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Solar rooftop solution - 25 year PPA with Asahi India Glass Ltd, TRIL Ltd & Lucas Ltd
Capacity - 3 MW tariff - Rs 6.61 / unit
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Dec 2017
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Approval to borrow up to 500 cr
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Amalgamation of Nupur Chemical Limited wef from 1 Oct 2016 (appointed date)
Topline of 60 cr as against bhageria of 240 cr in 2016.
Production capacity will not increase post-merger. For H-acid and Gamma acid depends on job. Bhagreia gets its work done by Nupur Chemical Limited.
Valuation of Nupur.
· Price to Sales Ratio (P / S ratio) of about 3.85 based on FY2016 sales (229.11 / 59.59) and 3.55 based on annualized sales for FY2017 (229.11 / 64.54)
· Price to Earnings Ratio (P / E ratio) of about 29.56 based on FY2016 profit (229.11 / 7.75) and 18.30 based on annualized profit for FY2017 (229.11 / 12.52)
· Price to Book Value Ratio (P / B ratio) of about 5.11 based on March 31, 2016, net worth (229.11 / 44.84) and 4.48 based on net worth at September 30, 2016, FY2017 (229.11 / 51.10)
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Once china implements pollution norms their cost of production so wants to go and take care of that.
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Company is engaged in trading of agrochemicals, pigments and various pharmaceutical ingredients.
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Aug 2017
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Fluctuating pattern of OPM indicates that Bhageria Industries Limited does not price its products and does not tolerate the raw material price. As a result, when the raw material prices increase, Bhageria Industries Limited has to take a hit on its profitability margins. Search cyclical pattern of operating profit margins is prevalently prevalent in companies that deal with products, which are commoditized and have the option to buy from a number of suppliers.
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Aug 2017
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Company seems to have put in the effort to improve its collection practices and has taken the receivables days significantly to 38 days in FY2014. FY2016 and about 50 days ago in FY2017. An investor would notice that the receivable days have started again. keep a close watch on the receivables days
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Aug 2017
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Wide variations in the ITR (Inventory Turnover Ratio) indicate that the company is not ready for its inventory levels, which further seems to indicate that the company might not be able to do so.
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Aug 2017
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Over FY2007-16, Bhageria Industries Limited has witnessed its sales increase from ₹ 43 cr to FY2007 to ₹ 238 cr in FY2016. For Achieving this sales growth the company has done to additional capital expenditure (capex) of ₹ 32 cr. HOWEVER, Bhageria Industries Limited has generated a cash flow from operations (CFO) of ₹ 73 cr. Over FY2007-16 leading to a surplus of ₹ 41 cr. As free cash flow (FCF) to its shareholders. Bhageria Industries Limited Seems to have Utilized the Resulting free cash flow (FCF) of ₹ 41 cr. To reduce its debt from ₹ 21 cr. In FY2007 to ₹ 13 cr. In FY2016, pay interest expense of₹ 15 cr over FY2007-16 and to pay dividends of about ₹ 14 cr to equity shareholders.
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10% Rev from solar + 90% from chemical
Kiri Industries
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11 Mar 2018
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Topline
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Expected To increase
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Operating margin%
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@ 15% To remain flat
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PE
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@ 8 Expected to be flat or increase to 10
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Company
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Profit over 9 mon of 2017-18
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Manf Capacity
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Parent company KIL
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80 cr
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-1 Plant with 3 manufacturing unit for Dyes at Vatva in Ahmedabad, 15,000 MTPA as of 2008
-1 Plant with 1 manufacturing unit for dye intermediaries at Padra in Baroda, Gujarat,
7,200 MTPA of H-Acid and
18,000 MTPA of Vinyl Sulphone
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Lonsen Kiri Chemical Industries Limited (LKCIL) JV -40% stake
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141 cr
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50,000 tons of reactive dyes
per annum
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DyStar 37.5% stake
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18 cr
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Overall Diluted EPS
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52 (9 months)
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Date
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Events
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13 Feb 2018
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Further debt amounting to Rs.8.80 Crore of KIL should be repaid in the coming twelve months which should further strengthen the earnings.
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13 Feb 2018
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Topline for 9months of 2017-18 is less because of annual maintenance shutdown and Diwali and Christmas holidays.
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27 Nov 2017
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24.00,000 equity shares allotted upon conversion of warrants @ 363 / share . Warrants were issued on 4 th
Oct 2016.
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Feb 2018
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Collection period is around 60 days for Dec 2017.
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Strategic initiative Nov 2017
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There has been a continued decline in the product-markets targeted by KIL. Within India, the increase in effluent handling costs, and the cost of the intermediation of intermediary goods and services (GST) are not guaranteed.
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This product, combined with KIL itself, is better and more stable. The company has made efforts to improve operational efficiency. As a result of all these factors, EBIDTA margins have expanded from single digits even to a couple of years ago to the 17% range, on a stand-alone basis . In spite of some inherent volatility in product prices, KIL is confident of Maintaining EBIDTA margins in the mid-teens .
· Besides operational improvements, there has been a complete clean-up of the balance sheet. KIL has been able to achieve reduction in its outstanding debt from a peak of Rs.853 Crores to Rs.159 Crores. Though the outstanding debt of Rs. 159 Crest shall be retired by the FY2022, KIL shall not be required to pay any interest in the said debt.
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KIL is focused on organic growth in the color business. Strengthening its product mix and adding dyes in its portfolio. Capex has started working on the Disperse Dyes facility and wants to come on stream in a phase-wise manner over the next year and a half. With these in place, the turnover is targeted to double from FY18 to FY20 . Most importantly, this expansion is completely capital non-dilutive : it wants to be funded by KIL's internal accruals, without resorting to additional external debt or new equity.
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KIL is looking to enter specialty tech-intensive chemical space in coming three to four years.
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1 . Disperse Dyes & related Intermediates : Disperse Dyes is the range of synthetic organic dyes that are used for dyeing or dyeing polyester fiber. It is one of the highest quantity consuming product rages among all types of dyes used for various coloring applications. China has been a major source of this product range globally, which is expected to change in future. After successful implementation of plant it wants to add better margin and revenue.
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2. Zero Liquid Discharge : As a statutory requirement, the company has made this project. The company wants reuse water requirement in manufacturing process and reduce dependence on groundwater. It wants help to strengthen the reputation of the company internationally.
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42 cr out of 72cr has been spent till feb 2018
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The Company targets a sustainable ROE of 22-25% for the next few years. Free Cash Flows for its Shareholders. The ultimate goal of the company is to focus on asset light products with good margins, which can help to sustain higher returns on capital employed and return on investments.
Industry
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The textile dye market remains attractive due to its large market size and around eight percent CAGR.
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Asia is the most attractive market due to its large demand and high growth rate.
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Specifically, India, the second largest global producer of dyes, is ramping up its capacity to meet demand growth in India and Global Markets.
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Secondly India is gaining a strong foothold in Global Markets because of deteriorating supply from China on account of environmental constraints in China.
China Effect
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It is expected dass die environmental issues in China shall hover over the industry for the Entire 2018 All which is expected to continue for three to five years.
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Since past three years around 40% of China's total manufacturing capacity has been temporarily shuttered impacting around 80,000 factories, which were fined with breaching emission levels.
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In some of the provinces of China, Local Government has been ordered to relocate manufacturing facility which must be completed in year 2019 to 2025.
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China which was a global exporter of chemical products is now required to import many of its requirements globally
Other players are
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Akshar Chemical
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Bodal Chemical
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Shree Pushkar Chemical
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Atul Limited
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Aarti Industries Limited
