TARGET ACHIEVED (61%) -FINEOTEX CHEMICALS LIMITED
DATE: 10/12/2017
  • COMPANY NAME : TARGET ACHIEVED (61%) -FINEOTEX CHEMICALS LIMITED
  • Description :

     

    Dear Reader,

    Today(29/12/2017), Fineotex has closed 76 Rs and was recommended to buy at 47 on 12 Dec 2017 for the target of 70 Rs.

     

    within 17 days it is giving 61% return......Fantastic return

     

    Book the profit as my given target 70 Rs achieved today.

     

    Happy investing!!

     

    Kamlesh

     ===================================================

    Recommendation - Buy

    Hold for 1 years

    Target: 70 Rs.

     

    CMP: 47 Rs

    BSE Code: 533333

    NSE- FCL

    Market Capital: 525 Cr.

    Face Value: 2

    52 Week Low / High: 23.5/48.5

    Book Value: 10

    Price/Book Value: 4.64

    Promoter Share Pledge – Nil

    TTM EPS – 1.96

    P/E – 24

    Dividend (%) – 5%

     

    Part – 1 Company’s Information:

    • Established in 2004 as Fineotex Chemicals Limited
    • Fineotex Chemical Limited is one of India’s largest and most progressive specialty textile chemical manufacturers.
    • Fineotex group is one of the leading manufactures of chemicals for textiles, construction,water-treatment,fertiliser,leather and paint industry.
    • The Company has a unique in-house development technical expertise is production of specialty Chemical with over several decades of experience.
    • The Company manufactures over 400 specialty chemicals and enzymes to Textile, Garment, Construction, Leather, Agrochemicals, Adhesive and Water Treatment.
    • Producing adhesives used in several industries like wood, paper tec.
    • In 2011, Fineotex had a technical collaboration with well-known European founded specialty chemical manufacturing company. The plant is located in Malaysia and is managed and owned by well known European founded specialty chemical.
    • Majority of company revenues are coming from the Textile segment
    • Having built a solid reputation for quality and reliability and shipping to different countries, Company success is based on Quality, Continuity, Flexibility, Reliability, Competitive Pricing, Technology Upgradation and New Product Development.
    • The Company has a global presence across 33 counties and caters to well known companies in India and overseas.
    • The company is ISO 9001:2008 , ISO 14001:2004, OHSAS 18001:2007 certified
    • As many as 9,98,110 equity shares, utilizing a total of Rs 2,92,34,846 (excluding transaction
    • costs), were bought back at an average price of Rs 29.3 between November 2016 and January 2017.

     

    Part – 2 Fineotex Chemical Limited- Subsidiary

     

    Foreign Subsidiaries:

     

    • Fineotex Malaysia Limited (FML), a Limited Company, was incorporated in Labaun Malaysia in 2011. FML in turn had controlling interest in 3 other companies in Malaysia that have established manufacturing and trading activities. These Companies are BT Biotex Sdn Bhd, BT Chemicals Sdn Bhd and Rovatex Sdn Bhd. Their turnover is higher than the parent company. The synergy of the businesses has helped all the companies.
    • Fineotex Specialities FZE was incorporated in the Region of UAE on 25th January 2015.

     

    Indian Subsidiaries:

    • FCL Landmarc Private Limited was incorporated in 2013. It was a subsidiary until 22nd September 2016. Since it did not carry any activity the Board of Directors in their meeting held on 22nd September 2016 sold off investments in FCL Landmarc Private Limited. Consent of shareholders was obtained by passing special resolution in the 12th Annual General Meeting held on 28th September 2015.
    • Manya Steels Private Limited is the only Indian subsidiary. It was acquired for diversification. The Company would commence commercial operations in the future.
    • None of the Indian Subsidiaries is/was a material Subsidiary

     

    Part – 3 Fineotex Chemical Limited- Manufacturing Facility

    • The Company has manufacturing facilities in India, located at Mahape, Navi Mumbai and Malaysian Facility located at Bander Baru Bangi with combined production capacity of 22,000MT/p.a.
    • Current overall utilization level is around 55%
    • Company is Equipped with the latest technology and own in-house R&D.

     

    Part – 4 Fineotex Chemical Limited – Geographical Presence plus network distribution

    • Presence across 33 countries, majorly in Europe and Asia.
    • There is longstanding relationship with marquee clients in the domestic market.
    • Customers include 65 textile players and non-textile players Sutlej Textiles, Himatsingka Seide, Grasim Industries, Reliance Industries, GHCL, Arvind, Raymonds, Pidilite Industries and Clariant (India).
    • The Company has received Star Export House recognition with its increase in exports.
    • There is a network of 68 distributors across India.

     

    Part – 5 Fineotex Chemical Limited – Products

     

     

    Part – 6 Fineotex Chemical Limited- Dividend History

     

    Dividend Declared

    Announcement

    Effective

    Dividend

    Dividend

    Remarks

    Date

    Date

    Type

    (%)

     

    13/02/2017

    20/02/2017

    Interim

    5

    Rs.0.1000 per share (5%)Interim Dividend.

    14/03/2016

    22/03/2016

    Interim

    10

    Rs.0.2000 per share(10%)Interim Dividend

    29/05/2015

    21/09/2015

    Final

    5

    Rs.0.1000 per share(5%)Dividend (Post Stock Split)
    (BC Date has been revised from 23/09/2015 to 25/09/2015)

    02/06/2014

    18/09/2014

    Final

    5

    Rs.0.5000 per share(5%)Dividend

    16/05/2013

    19/09/2013

    Final

    5

    Rs.0.5000 per share(5%)Dividend

    27/11/2012

    20/12/2012

    Final

    5

    Rs.0.5000 per share(5%)Dividend

    31/05/2011

    29/07/2011

    Final

    5

    Rs.0.50 per share(5%)Dividend (Revised)

     

     

    Part – 7 Fineotex Chemical Limited - Shareholding Pattern:

     

    Part – 8 Financial Focus:

    Focus on - Financial Results March 2017:

    • During the year, the turnover of the Company has grown to Rs. 7566.88 Lakhs, as compared to Rs. 6806.30 Lakhs for FY 2015-16 resulting in growth of 11.17%.
    • Standalone Profit After Tax for the year was 1594.76 as against Rs 1513.05 Lakhs for 2015-16 an increase of 5.6%
    • Earnings per share of Rs. 2 was Rs. 1.43 for the year as against Rs. 1.35 for 2015-16 an increase of 6.00 %.
    • Consolidated Profit after Tax for the year was Rs. 2063.47 as against 1704.04 Lakhs for 2015-16 an increase of 21.09%.
    • The exports contribute over 20% of its operations on a standalone basis. The Company has also reached an advance stage in production of products which would foray the Company’s operations in to new sector thereby widening and diversifying its activities.

     

    • “Aquastrike VCF” addition to portfolio - supports topline growth: During the quarter, the company succeeded in getting approval of its new product by the name of “Aquastrike VCF” (a non-toxic mosquito life cycle killer) from Ministry of Health in Malaysia, Singapore Public Utility Board, Vietnam and Cambodia by their respective authorities while approval from European authorities is awaited. Going forward, this newly launched product along with management move to expand its geographic reach will contribute in substantial growth in top line.

     

     

    Focus on - Financial Results June quarter 2017:

    • For the quarter ended 30-06-2017, the company has reported a Consolidated sales of Rs 30.35 Crore, down -21.00 % from last quarter Sales of Rs 38.41 Crore and up 2.78 % from last year same quarter Sales of Rs 29.53 Crore Company has reported net profit after tax of Rs 5.60 Crore in latest quarter.

     

     

    Key Risks

    • Intense competition.
    • Foreign exchange risk.
    • Switching sticky customers.
    • Commoditisation
    • Cyclicality of textile business
    • Regulations

     

    Investment Rational:

    1. Zero debt company
    2. High ROCE & ROE
    3. 3 decades knowledge in specialty chemical business.
    4. New products -   Aquastrike VCF” addition to portfolio - supports topline growth.
    5. The main competitive advantage includes:
    6. High Entry Barriers
    7. Sticky Customer Profile
    8. Customer doesn’t focus on pricing but on reliability & technical superiority.
    9. The Fineotex brand is well established since 3 decades and known for its superior quality
    10. Network of 68 distributors pan-India, offering higher returns to them to ensure better market share
    11. Products catering to the entire value chain in textile manufacturing process
    12. Products are unique & efficient concentrated products with low dosage, transport and storage costs.
    13. The global market for Textile Chemicals is estimated to be USD 20.3 bn, and is expected to reach USD 24.3 bn in 2019. The market for textile chemicals is driven by the growth of apparels and technical textiles. The textile chemicals market is expected to grow at a CAGR of 3.6% for the next 5 years.
    14. The Indian textile chemicals market is estimated at USD 1.1 bn in 2014. It is expected to reach USD 1.9 bn by 2019, growing at 11.9% p.a. Growth is driven by domestic demand and exports of high quality textiles.
    15. Low cost labour and raw material availability have been the advantages enjoyed by Indian manufacturing companies traditionally. Increasingly, though, specialty chemicals companies are focusing beyond these traditional cost advantages.
    16. A large domestic demand for textiles, growth in branded apparel, strength in exports and opportunities for technical specialty textiles, together provide a large and growing market for textile specialty chemicals
    17. focusing on innovation in eco-friendly nontoxic solution for Mosquito outbreak.
    18. The acquisition of Biotex has given access to technical expertise to strengthen and expand the product portfolio and processes.
    19. Huge domestic demand for textiles, growth in branded apparel, strength in textile exports and growing opportunities for technical specialty textiles provide a large and growing market for textile specialty chemicals.
    20. The competitive advantages include a brand known for quality since three decades, high entry barriers, sticky customer profile and customer focus on reliability and technical superiority rather than pricing.

     

     

    Recommendation:

    • Stock CMP is 47 Rs. and stock is trading at P/E 24 & TTM EPS 1.96, based on all above investment points, stock may touch 70 Rs. Within 1 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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