DATE: 07/02/2018
  • Description :


    Recommendation - Buy between 157 to 130 Rs

    Tgt - 250 Rs

    Hold - 2 Years



    • CMP: 154 Rs
    • BSE Code: 500184
    • NSE- HSCL
    • Market Capital: 6569 Cr.
    • Face Value: 1
    • 52 Week Low / High: 40.4/197
    • Book Value: 24.6
    • Price/Book Value: 6.38
    • Promoter Share Pledge – Nil
    • TTM EPS – 4.82
    • P/E – 32.5


    Before moving to know about Himadri Specialty chemical company’s details, better to know some basic details about Coal tar, Coal tar pitch and Carbon black.


    The feedstock for Himadri Specialty chemical company (HSCL) is coal tar for distillation unit.


    The feedstock coal tar is distilled into coal tar pitch. It further derives by-products that are processed through various stages to produce derivatives. These derivatives are sold as finished products at various points across industries. It also involves power generation for captive consumption.


    What is coal tar?


    Coal tar is derived from coal. It is a byproduct of the production of coke, a solid fuel that contains mostly carbon, and coal gas. Coal tar is used primarily for the production of refined chemicals and coal-tar products, such as creosote and coal-tar pitch.


    Coal tar is produced through thermal destruction (pyrolysis) of coal, and the composition of coal tar varies with the process and type of coal (for example: lignite, bituminous or anthracite) used to make it


    A large part of the binders used in the graphite industry for making "green blocks" are coke oven volatiles (COV), a considerable portion of which are coal tar.



    1. Medicine
    2. Construction
    3. Industry


    What is coal-tar pitch?


    Coal-tar pitch is a thick black liquid that remains after the distillation of coal tar. It is used as a base for coatings and paint, in roofing and paving, and as a binder in asphalt products. Both coal tar and coal-tar pitch contain many chemical compounds, including carcinogens such as benzene.


    What is Carbon Black?


    Carbon black is composed of fine particles consisting mainly of carbon.


    Various features of carbon black are controlled in production by partially combusting oil or gases.


    Carbon black is widely used in various applications from black coloring pigment of newspaper inks to electric conductive agent of high-technology materials.



    A large amount of carbon black is used mainly in tires as excellent rubber reinforcement. Carbon black is also an excellent coloring agent as black pigment, and therefore is widely used for printing inks, resin coloring, paints, and toners.


    Furthermore, carbon black is used in various other applications as an electric conductive agent, including antistatic films, fibers, and floppy disks.


    Part – 1 Company’s Information:

    • Himadri Speciality Chemical Ltd., incorporated in the year 1987, is a Mid Cap company and primarily engaged in the manufacturing of carbon materials and chemicals
    • Coal tar is the by-product derived from coke oven batteries used in the steel industry. It is derived when you convert coking coal into low ash metallurgical coke. The gas thereby derived, is converted into coal tar. This coal tar is distilled and developed into multiple value-added derivatives
    • Coal tar is the key raw material that the Company uses to derive various other speciality chemicals. It is distilled to produce coal tar pitch, naphthalene, creosote oils and other speciality oils of various grades. Naphthalene is further processed to produce Sulphonated Naphthalene Formaldehyde (SNF).
    • Creosote oils and other Speciality oils are sold to customers for specialized applications as well as further processed into carbon black feedstock to manufacture carbon black. Clean and green power is generated as a co-product for captive consumption and the surplus power is exported to State Grid.
    • The Company also develops advance carbon material from coal tar to manufacture anode material for lithium-ion batteries.
    • All the products find its applications across the key sectors of the economy. This includes aluminium, steel, automobiles, construction, infrastructure and renewable energy.
    • Advance carbon material places the Company exceptionally well in the sunrise sectors to cater to the growing demand from the consumer electronics (smartphones), electric vehicles and energy storage solutions.
    • The Company has operations in India and caters to both domestic and international markets.
    • India’s leading manufacturers of Carbon Black, catering tyre industry and several non-tyre applications including rubber, conveyor belts, plastic, wire & cable, coating and inks, among others.
    • Company is having eight zero-discharge strategically located manufacturing facilities spread across India (West Bengal, Andhra Pradesh, Chhattisgarh, Odisha and Gujarat) with a total installed capacity of 400,000 tons of coal tar distillation, 120,000 tons of carbon black, 68,000 tons of SNF (Sulphonated Naphthalene Formaldehyde) and 20 MW of power plant.


    Part – 2 Company’s Subsidiaries Company:


    • The Company also has a wholly-owned subsidiary in India in the name of Equal Commodeal Private Limited, a step down wholly-owned subsidiary in the name of AAT Global Limited, incorporated in Hong Kong and another step down subsidiary with 94% shareholding in the name of Shandong Dawn Himadri Chemical Industry Limited, incorporated in China.


    Part – 3 Company’s Manufacturing Details:

    • Works unit number – I Liluah, Howrah (W.B.) & unit number – II Gadadhar Bhatt Road, Liluah, Howrah (W.B.)
    • Mahistikry plant  -  Mahistikry, P.S. – Haripal District Hooghly (W.B.)
    • Visakhapatnam unit -  Ancillary Industrial Estate  Visakhapatnam (A.P.)
    • Korba unit -  Jhagrah, Rajgamar Colliery Korba (Chhattisgarh)
    • Vapi unit -  GIDC - Vapi (Gujarat)
    • The Company’s Melting Plant (Coal tar Pitch) at Sambalpur in the state of Odisha has become operational since August 2016
    • Windmills 

    Village Amkhel: Taluka- Sakri, District Dhule, Maharashtra

    Village Titane, Taluka- Sakri, District Dhule, Maharashtra

    • Falta SEZ unit - Falta Special Economic Zone, West Bengal
    • China unit -  Longkou, Shandong China


    Production Capacity

    • 400000 TPA – Coal tar Distillation Capacity
    • 120000  TPA –Carbon Black Capacity
    • 68000 TPA – SNF Capacity
    • 20 mw – Power plant – co-generation Capacity



    Part – 4 Company’s Products Overview


     1. Coal Tar Pitch

    • 400,000 tpa Coal Tar Distillation Capacity, 85% of CTP Consumption by Aluminium Industry, 15% of CTP Consumption by Graphite Industry
    • Coal Tar Pitch (CTP) has been traditionally used in the aluminium and graphite industry as a binding agent for anode and electrode manufacture.
    • An essential for the aluminium industry, Coal Tar Pitch is used to make carbon electrodes that help produce aluminium.
    • It is a specially-produced pitch derived from controlled distillation of coal tar.
    • India’s present per capita primary aluminium consumption is less than 5 kg as against the
    • global average of 12-15 kgs. The consumption is expected to witness a 7.7% CAGR till 2021,
    • largely driven by electrical & electronics sector followed by the automotive & transportation,
    • railways, aerospace, building & construction,packaging, consumer durables, defence and
    • several other industrial applications.


     2. Carbon Black

    • 120,000 TPACarbon black installed capacity
    • 3rd largest Carbon black producer in India
    • The Company is amongst India’s largest manufacturers of Carbon Black (CB).
    • It is a forward integrated business and fi nds its applications as a reinforcing agent for rubber
    • products in the tyre and non-tyre industry.
    • It also acts as a speciality ingredient for products like Plastic Master batch, Fibre, Wire & Cable, Pipes, Engineering Plastics, Films, Inks and Coatings, among others. The division enjoys access to superior, consistent and customized raw material feed from its in-house distillation unit.


    3. Naphthalene

    • Naphthalene is derived from coal tar distillation and is produced in liquid and amorphous forms.
    • More than 90% of the world’s naphthalene is produced using coal tar.
    • It is widely used to produce phthalic anhydride and naphthalene sulphates. It has several industrial uses, mainly  as a chemical intermediate, naphthalene balls dyes & dye intermediate and super plasticizer, among others. During the year, the Company developed superior refined quality moth balls for pharmaceuticals applications.
    • The demand for naphthalene in India is increasing at a rapid pace because of growing textile exports, increasing use of naphtha in construction industry and rising production ofsulfonated naphthalene formaldehyde, added to construction chemicals.


    Naphthalene Value Proposition

    Refi ned Naphthalene

    Special Grade Naphthalene is formulated to cater customer’s specific requirements in dyestuff and dyes intermediates application.

    Naphthalene Moth Ball

    Moth Balls are made by using superior grade chemical composition and leading-edge techniques. These are made in compliance with pre-defi ned quality standards for uses in natural fragrances.


     4. Sulphonated Naphthalene Formaldehyde (SNF) and Poly Carboxylate Ether (PCE)

    • SNF is a next-generation product for the  Construction Chemical Industry (Admixture),Agro chemicals, Latex and Gypsum. It improves the concrete mix workability and it’s compressive fl exural strength.
    • The Company is India’s largest Indian manufacturer of SNF with an installed capacity of 68,000 MTPA.
    • Penetration of SNF admixture in concrete in India is less than 10% against a high global average.
    • This gives an enormous potential to the Company to make in-roads.
    • SNF is suff ering from very high dumping of this material from other producing countries and need Government intervention for protection of domestic industry.
    • PCE is yet another nextgeneration, cost-eff ective product used in high-strength, high-performance concrete
    • The Company manufactures fi ve variants of PCE-based admixtures under the brand Himfl owcrete. With India’s growing infrastructure impetus, PCEbased admixture will fi nd its necessary demand.


     5. Advanced Carbon Material

    • The Company has forward integrated into manufacturing Advanced Carbon Material from in-house produced Coal Tar.
    • The Advance Carbon Material is used as anode materials in lithium-ion batteries, thus making Himadri, the fi rst Indian Company to develop this material. Lithium batteries are becoming the most competitive batteries in the fi eld of power applications. It is used in mobile phones, tablets and digital cameras, off ering simplifi cations and cost reductions over multi-cell designs. Lithium-ion batteries are witnessing a huge growth in demand in electric vehicles and energy storage solutions




    6. Research and development

    The Company’s Research and Development department, at Mahistikry unit (Hooghly), has

    been recognized by the Government of India.



    Part – 5 Himadri Specialty Chemicals Limited – Innovation Impact



    Part – 6 Himadri Specialty Chemicals Limited- Dividend History

    Dividend Declared















    Rs.0.1000 per share(10%)Dividend





    Rs.0.0500 per share(5%)Dividend





    Rs.0.1000 per share(10%)Dividend





    Rs.0.1000 per share(10%)Dividend





    Rs.0.10 per share(10%)Dividend








































    AGM & Nil Dividend



    Part – 7 Himadri Specialty Chemicals Limited - Shareholding Pattern:



    Part – 8 Himadri Specialty Chemicals Limited – Care Rating



    Part – 9 Himadri Specialty Chemicals Limited - Risk


    1. Industry Risk: Any downturn in the user industry may impact the core business of the Company.
    1. Raw Material Risk: Unavailability of key raw material may impact the regular operations of the Company.
    1. Competition in the value-added products:The competitors may replicate the niche products of the Company, impacting the margins.
    1. Cost risk: The Company may incur higher working capital outlay and interest payment on debts to support the growing business operations, impacting the profi tability.
    1. Forex risk: Unfavourable currency movement may lead to notional losses, refl ecting the profi tability of the Company.
    2. Logistics risk: The Company may loose its customers in the event of delayed delivery of the key products.
    1. Environment risk: Being a speciality chemicals manufacturer, the Company is highly exposed to environment risks through effl uent discharge, harmful emissions, improper waste management and resource depletion, among others.


    Part – 10 Financial Focus:


    Focus on - Financial Results March 2017:


    • Standalone gross revenue from operations stood at 147,125 lakhs in 2016-17.
    • Net revenue from operations stood at 132,417 lakhs during 2016-17 as compared to 115,184 lakhs in 2016-2015. Sales volumes increased by 19.31% y-o-y.
    • EBITDA stood at 24,698 lakhs as compared to 15,297 lakhs in 2015-16.
    • Profi t after tax stood at 8,117 lakhs as compared to a loss 1,636 lakhs in 2015-16.
    • 4% EBITDA Growth on YoY basis
    • 596% PAT Growth on YoY basis
    • 755 bpa PAT Margin growth on YoY basis
    • 537 bps EBITDA Margin growth on YOY basis



    Focus on - Financial Results December quarter 2017:


    • For the quarter ended 31-12-2017, the company has reported a Standalone sales of Rs 500.08 Crore, up 27.7 % from last year same quarter Sales of Rs 391.32
    • Company has reported net profit after tax of Rs 70.14 Crore in latest quarter compare to last year December 2016 quarter profit 11 Cr. up 248%.



    Investment Rational:

    1. Turnaround story due to company is having strong advance carbon material products
    2. Low debt to equity <1
    3. India’s largest coal tar pitch producer with a market share of 70% catering the requirements of the aluminium and graphite industries. Company is one of the few integrated global manufacturers to produce zero QI impregnating coal tar pitch.
    4. Market leader 17% Market share in Carbon Black
    5. India’s leading integrated Speciality Carbon Chemical Company and diversified presence across carbon value-added chain with an impressive array of high-demand specialized products.
    6. India’s fi rst Company to develop anode material for lithium-ion batteries which find its applications in smartphones, consumer electrical, electrical vehicles and energy storage solutions.
    1. India’s aluminium production is expected to increase from 2.75 MTPA to 4 MTPA by end of 2019. The continuous smelting requirement of the aluminium industry ensures a steady demand for the Company’s coal tar pitch.
    1. Indian tyre market is of the size of 550 billions and has grown at a CAGR of 6% over the past five years. The volume growth across this period has also been in sync with the revenue growth.The outlook for the domestic tyre industry, over the near to medium term is stable. It will be supported by favourable tyre demand, both in domestic and exports. It is also likely to show improvement in realisation. The industry is expected to witness 12-13% CAGR during FY2017-20

    Launched 5 grades of speciality carbon black

    Introduced special food grade carbon black

    1. As such, India’s naphthalene market is expected to witness 18% CAGR during 2014-19 (Source: India Naphthalene Market Forecast & Opportunities, 2019).
    2. According to a research report by Transparency market research, the growth of Lithium Ion Battery market is rising due to increasing demand for lightweight electric cars. The report further estimates that the global market for Lithium Ion Battery is expected to touch $ 77.42 billion by 2024.
    1. The economy is expected to embark on higher growth trajectory going ahead. This will largely be driven by the proactive measures taken by the government, improvement in consumption, timely rains, higher public sector spending, exports, increased government spending in infrastructure and private investments, among others.
    2. Leading aluminium smelters are ramping up capacities and are expected to grow from 2.75 million tonne to 4 million tonne within a span of two years. This will drive the demand for coal tar pitch.
    3. The demand in the tyre industry will be driven by the growth of the automobile sector. Government’s increasing impetus on infrastructure will drive the demand for SNF and PCE. Our value-added products are also showing a positive traction with increased enquiries.
    4. Largest producers of CTP, catering to India’s two-thirds of requirement of aluminium and graphite industry
    5. Developed a special pitch which is used by DRDO in production of long-range warhead missiles Diff erent grades of pitch also fi nd application in industries like refractories, carbon paste, paints and ultramarine pigments among others.
    1. Chinese capacities are coming down owing to the environmental issues. It does not have any impact on company business because coal tar pitch cannot be imported
    2. It caters to niche applications in tyre and non-tyre industry like moulded rubber goods, plastic master batch, fi ber, wire and cable pipes, engineering, plastics, fi lms, inks and coatings, among others.
    3. Today, leaders in supply to Moulded Rubber Goods industry in India which has a specific requirement for cleaner blacks.
    4. SNF and PCE are the next generation products for construction industry. Companyis the largest manufacturer in India with installed capacity of 68,000 metric tonne per annum. This business segment has high-growth potential, as the penetration of SNF admixture in concrete in India is less than 10% against very high global average. Compnay  in-house naphthalene production gives a quality and cost edge for company. With the increasing construction activities in the country,
    1. Advance carbon material will serve as new core business for Himadri and propel compnay to next stage of growth in journey.
    2. Advanced carbon Material is used in Lithium-ion battery As anode material,Which is used in the Sunrise sectors like Smartphones, electric Vehicles and energy Storage among Others. The global Automobile and energy Storage industries Are witnessing a Disruptive change Of unprecedented Proportions powered By lithium-ion Batteries. Governments And corporations Across countries Are committing to Substantially enhance Penetration of electric Cars and renewable Energy storage. Lithiumion Battery demand is Growing at a very fast Pace and Himadri is well Positioned to capitalize On this demand surge.





    • Stock CMP is 157 Rs. and stock is trading at P/E 32.23 & TTM EPS 4.82, based on all above investment points, stock may touch 250 Rs. Within 2 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.