KESAR PETROPRODUCTS LIMITED
DATE: 22/10/2017
  • COMPANY NAME : KESAR PETROPRODUCTS LIMITED
  • Description :

     

    CMP: 65.5 Rs

     

    BSE Code: 524174

     

    NSE- NA

     

    Market Capital: 636 Cr.

     

    Face Value: 1

     

    52 Week Low / High: 29.5/74.8

     

    Book Value: 7

     

    Price/Book Value: 9.34

     

    Dividend (%): 0%

     

    Promoter Share Pledge – Nil

     

    TTM EPS – 2.34

     

    P/E – 28.14

     

    Part – 1 Company Overview:

     

    • Kesar Petroroducts was established in 2010 (incorporating the business of Shreyas Intermediates Limited) operating in pigment chemical sector.

    • The Company is among leading Indian manufacturers of Phthalocyanine Blue Crude and downstream products.

    • One of the best-known CPC players in the world coupled with a growing non-CPC play.

    • Kesar Petroproducts addresses the growing needs of pan-India clients as well as those in 15 countries.

    • Company is manufacturing the different types of pigments which are used for various application like Inks, Rubber, Plastic, Textiles, Paints industry.

    • Company is manufacturing dye intermediate Naphthalene which is used mainly as a precursor to other chemicals. The single largest use of naphthalene is the industrial production of phthalic anhydride.

     

     Part – 2  Company’s products capacity:

     

    Pigments

     

    Product                     Capacity*

     

    CPC Blue Crude      18000 MTA

     

    Alpha Blue              2400 MTA

     

    Beta Blue                3600 MTA

     

    Dye intermediates

     

    Product                     Capacity*

     

    K-Acid                     840 MTA

     

    Gamma Acid           360 MTA

     

    Vinyl Sulphonate    1200 MTA

     

    Sulpho VS               600 MTA

     

    Part – 3 Company’s prominent clients:

     

    • Sudarshan Chemicals

    • Unilex Colours & Chemicals Limited

    • Jaysynth

    • Alliance Organics LLP

    • Heubach

    • Sun Chemical

    • Kolorjet Chemicals Private Limited

    • Mallak

    • Hindprakash Tradelinks Private Limited

    • Rasayano

     

    Part – 4 Kesar Petroproducts Limited- Shareholding Pattern:

     

     

    Share holding Pattern

    Description

    Percent of Share (%)

    Promoters & Promoters Group

    63.85

    Public Holding

    36.15

    Total

    100

     

    Part – 5 Financial Focus:

     

    Focus on - Financial Results March 2017:

     

    • During the year (2016-2017) under review, the total revenue increased to 1733.29 million in comparison to the previous year (2015-2016) revenue of 1440.46 million up by 20% on YOY basis.

    • The EBITDA has increased from 158.4 million to 266.63 million up by 68% on YOY basis

    •  Profit after tax increased to 200.82 million from 121.02 million up by 66%.

     

     Focus on - Financial Results June quarter 2017:

     

    • For the quarter ended 30-06-2017, the company has reported a Standalone sales of Rs 42.60 Crore, up 3.59 % from last year same quarter June 2016 Sales of Rs 41.12 Crore.

    •  Company has reported net profit after tax of Rs 8.03 Crore in latest quarter compare to last year June 2016 quarter profit 5 Cr. up 60%.

     

     

    Investment Rational:

     

     

    • Promoter holding has increased from 31.03 % to 63.85% in the month of September 2017 which indicate that promoters are more confident about his business.
    • Zero debt company
    • Robust improvement in OPM from 0.3 to 15.38% & NPM from -2.21 to 11.59% for last 5 years.
    • The Company’s gearing moderated from a peak of 0.53 in FY14 to 0.44 in FY17.
    • The Company’s net worth increased from 65.79 crore in 2015-16 to 88.23 crore in 2016-17.
    • Company’s unlocking-driven approach helped sales increase 20% to C173.33 crores while operating profit increased 67% to C25.90 crores in FY17.
    • Company exports has increased to 8.1% of revenues in  2016-17 compare to 3.1% in 2015-2016 and estimating to increased 10% in 2017-2018
    • Company revenues from non-CPC products, has increased to 40% in  2016-17 compare to 20% in 2015-2016 and estimating to increased 60% in 2017-2018
    • The Company’s profit after tax strengthened ~66% in FY17, enhancing its accruals available for reinvestment.
    • Pigment is accounts for a mere 2% of the overall colors market, indicating a vast operating leverage that can keep the sector growing sustainable for years to come
    • Due to vast scope in printing technology improve color demand.
    • Due to seeing a weakening in China’s CPC competitiveness; opportunity for robust Indian pigment manufacturers.
    • Company has Commissioned a 300 TPM beta facility in January 2017 and Debottlenecked existing alpha blue capacity – from 80 TPM to 125 TPM and this higher capacity utilisation will increased company’s revenues, margins and surpluses in a sustainable way across the foreseeable future.
    • The Company has intends to launch two new products that will serve as raw materials for dyes with an aggregate capacity of 250 TPM and an annual revenue potential of C100 cr.
    • Pigments are largely used in the printing inks, paints and textile sectors and increased consumption is expected to catalyse the market for each, strengthening the relevance of pigments.
    • According to an August 2016 report by Global Market Insights, the global pigments market was worth $12.7 billion in 2015 and projected to grow at a compound annual growth rate (CAGR) of 4.5% through 2024.
    • Company is believing that by 2019-20, the Company’s fully-utilized capacities should be in a position to generate peak revenues of nearly 700 crore at margins higher than the prevailing levels.
    • The Company has target to strengthen its value-chain through the downstream manufacture of products extending beyond CPC (building block)
    • As capacity utilisation increased from 39.26% in FY17 (CPC including pigments) to an estimated 45% in FY18, this could result in enhanced output and profitability (increased  ROCE)
    • The Indian pigments sector is becoming increasingly competitive following an increase in wage and environment compliance costs in China; Indian exports have subsequently increased
    • Over the last few years, an increased investment in environment compliance within China’s pigments sector coupled with a sharp increase in wages, has affected China’s global CPC market share. Nimble Indian pigment manufacturers have capitalized and their competitiveness is reflected in the fact that some have even begun to export to China.
    • Up to 2008 company was making loss which turn in 20 Cr. profit as a turnaround story due to improvement in plant capacity utilisation & robust improvement in operating profit margin.
    • Company is accounting 8% of the global CPC Blue Crude (and downstream products) Crude (and downstream products) market due to a high quality commitment.
    • The global pigment market witnessed significant growth over the past few years owing to developments in end user industries like paints & coatings, construction, etc. and increased demand for specialty products

    Recommendation:

     

    • Stock CMP is 65.5 Rs. and stock is trading at P/E 28.1 & TTM EPS 2.34, based on all above investment points, stock may touch 90 Rs. within a years’ time horizon.

     

     

    Please note:

     

    • Note: The articles are not research reports but assimilation of information available on public domain and it should not be treated as a research report.

      Registration status with SEBI: I am not registered with SEBI under the (Research Analyst) regulations 2014 and as per clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations”

      Disclosure: It is safe to assume that I might have the discussed companies in my portfolio and hence my point of view can be biased. Readers should consult registered consultants before making any investments.

     

     

     

     

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