A fundamental research on Speciality chemicals stocks in Indian markets (BSE, NSE)

 

Introduction

A fundamental research on Speciality chemicals stocks in Indian markets (BSE, NSE) is done and the stock are classified based on there market capitalisation. Large-cap companies have a market cap of Rs 20,000 crore or more. Meanwhile, the market cap of mid-cap companies is between Rs 5,000 crore and less than Rs 20,000 crore. Small-cap companies have a market cap of below Rs 5,000 crore. Here I have considered small cap companies having market capitalisation more than 500 crore.

Key Financial Ratios considered

EBITDA Margin %

Net Profit Margin %

Debt to Equity

3 Yr CAGR Sales (%)

3 Yr CAGR Profit

ROCE

ROE

Inventory Turnover Ratio

Debtor Turnover Ratio

TTM PE

PB

EV to Sales

EV to EBITDA

3 Yr Price performance (%)

6 M Price performance (%)

Apart from these ratio the last three Qtr results (revenue, net profit, margin ratios etc) of the FY21-22, Balance Sheets of past five years were also considered. 

Fundamental Research and Analysis

Colour Coding

Bold - top performer	Above Industry Avg Performance
	Risky in terms of that ratio
	Normal / Avg Performance

Large-cap companies

		Aarti Industries	Gujarat Fluoro chemicals	Atul Ltd
Recommend		yes (Rank 2)	yes (Rank 1)	no
Comment		sales, fixed assets are increased and margins are sustained	performance is very good from last 3 Qtr, sales and margins are increased this year	margins decreased
EBITDA Margin %		21.8	30.07	27.53
Net Profit Margin %		11.62	-8.25	17.57
Debt to Equity		0.76	0.46	0.03
3 Yr CAGR Sales (%)		5.79	-11.71	2.02
3 Yr CAGR Profit		16.81	NA	32.16
ROCE		12.31	11.23	24.43
ROE		16.52	-6.15	18.91
Inventory Turnover Ratio		5.67	3.16	6.8
Debtor Turnover Ratio		6.49	4.3	5.14
PE		27.14	40.2	41.79
PB		6.79	7.08	6.32
EV to Sales		8.12	10.88	7.15
EV to EBITDA		37.23	36.18	25.98
3 Yr Price performance (%)		175.93	NA	173.24
6 M Price performance (%)		2.1	45.19	2

Mid-cap companies

	Recommend	Comment
Navin Fluorine	no	no improvements from the previous years
Clean Science	yes	? will they be able to sustain there margins
Vinati Organics	yes	increased sales significantly and net margin slightly decreased, fixed income increased
Alkyl Amine	no	this year margins are decreasing
Balaji Amines	yes	sales increased significantly, margins sustained
Anupam Rasayan	yes	sales are increased, debt of the company decreased, net margin improved, operating margin sustained
CHEMPLAST SANMA	yes	History of unstable p/l, but the company is improving and margins and net profits are improving as sales are good in past 2 Qtr and repaying the debt
Privi Special	no	p/l worse than previous year
Supreme Petro	yes	increased sales significantly and net margin slightly decreased, currently undervalued
Rossari	hold	net margins decreased significantly but the sales improves and fixed asset improved significantly
Laxm Organics	hold	generally the company margins are less but this year the sales increases significantly and net margins sustained

Small-cap companies

		Recommend	Comment
Tatva Chintan		yes on dip / hold currently	net margin increased significantly and PE is less when compare to the companies having similar net margin, sales increased normally
Guj Heavy Chem		hold	sales improved significantly, margins sustained, this year results of all Qtr are good, not much increase in the fixed assets recorded, ROCE is declining significantly yoy
Neogen		yes - keep a watch	sales increased normally and margins sustained, fixed assets doubled, interest increased slightly may be sales will increase after 1 or 2 years once the new pp&e will become fully functional, last Qtr sales were high
Meghmani Finech		strong yes	operating margin and sales improves significantly without much increase in fixed assets - may be mgmt changed and improved the company
AMI Organics
Paushak Ltd		no	this year sales did not improve much and margin also did not sustained
Fairchem Org.		hold	sales increased significantly, op margin increased, net margin sustained, moderate increase in fixed assets, looks overvalued dated 28th Feb
IG Petro		strong yes	sales increased significantly, margins very slightly decreased may be affect of fixed assets increased significantly 2 years back and the plants are being functional from this year
Camlin Fine
Yasho Industries
Apcotex Ind
Fineotex Chem		hold	sales increased significantly, margins are not sustained, last Qtr the result was very good
Manali Petro		strong yes	sale, margins increases way high - may be some new product differentiation, currently undervalued - dated 28th Feb
Clariant Chem		no	p/l unstable margins are not as high only previous year there was spike
Chemcon Special		hold	sale are nearly same, margins sustained
Black Rose Ind		hold	sales improved margins sustained
Ultramarine		no	sales improved, margins fall, net profit sustained
Dharamsi Morarj		no	sales improved, margins fall due to expenditure increased significantly, net profit decreased
Foseco India		no	no better from previous years
Jyoti Resins		hold	sale improved, margins decreased, fixed assets increased significantly
GFL
Indo Amines		no	sales improved, margins fall due to expenditure increased significantly, net profit decreased
Jayant Agro-Org
Kanoria Chem		strong no	losses and highly unstable p/l
Plastiblends

Due to the space constraints in the post the more detailed work can be found on the mid-caps and small-caps here  

https://docs.google.com/spreadsheets/d/1nASaRvdH20kI6iMyr4MhnxzFznYWZSRbxiRN4d-TFhM/edit#gid=658250394

My top picks in each category

Large Caps:

1. Gujarat Fluoro chemicals
2. Aarti Industries

Mid Caps:

1. Clean Science
2. Vinati Organics
3. Supreme Petro
4. Anupam Rasayan

Small Caps:

1. Meghmani Finech
2. IG Petro
3. Manali Petro

Note: 

- The financial ratios may differ based on the time, these ratios were taken from Edelweiss (https://www.edelweiss.in/quotes/equity/aarti-industries-ltd-2378/peer-comparison) dated 28th Feb, 2022. 

- These stock recommendations are done based on the fundamental research please do your own analysis about when to entry or exit a stock and these are my personal views not subject to any litigation.

References:

https://www.indiainfoline.com/knowledge-center/share-market/difference-between-large-cap-mid-cap-and-small-cap

https://www.moneycontrol.com/

https://www.edelweiss.in/quotes/equity/aarti-industries-ltd-2378/peer-comparison