Shree Pushkar Chemicals & Fertilisers Ltd - Research Report

 
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Private Client Research

Rating

Buy

Sector

Dyes & Pigments

Company

Shree Pushkar Chemicals & Fertilisers Ltd

Reco Price
Rs. 96
Price Target (1.5 - 2 Years)
Rs. 190
Upside
97.92%

Date

January 13, 2016
Sensex
24387.69
CNX Nifty
7562.4

Exchange

Code

NSE
SHREEPUSHK
BSE
539334

Capacity expansion and improving working capital cycle will increase efficiency and drive future growth.

Zero Waste Company:
Shree Pushkar Chemicals & Fertilizers founded in 1994 is an established market leader in the manufacturing of dyes & dyes intermediates. The company manufactures Naphthalene derivatives and operates in 4 business verticals, namely, Dyes and dyes intermediate, Acids, Fertilizers and Animal feeds. The company has EXECUTED a backward integration for manufacturing dyes and dyes intermediates due to which, any effluents produced is re-used for manufacturing other products, which are saleable. Thus, the company leaves behind no waste which is very essential for chemical company as per the Environmental Regulations in India. The above processes contribute 20% of the top line and thereby expand the gross profit margin of the company.

Business Verticals:
The company operates in four verticals of which 80% of the overall revenues are from dyes and dyes intermediaries which are majorly exported, 17% is from fertilizers and allied products which are sold under the brand “Dharti Ratan” and the remaining 3% is generated from cattle feeds which are sold to Karnataka Milk federation, Nandani, Nirma, Suna Chickens and Amul. The company is into manufacturing of other products from its effluents whose treatment otherwise would have been an added cost to the company. This process has not only added to the revenues but also increased its EBITDA margin.

Expansions to lead top line growth:
Pushkar has a total plot area of 12000 sq mtr of which 25% is built up area. The latter comprises of the factory building and other auxiliary structures. In addition, the said unit also has an underground water storage tank of 45 cubic mtrs and a power sub-station with a transformer and a HT side substation of 750 KVA. This arrangement helps the company to save 30% of its electricity costs which translates to 3cr saved every year.

It has also planned for a capacity expansion of an estimated 70cr in Dyes, H Acid, Vinyl Sulphone, Sulphuric Pottash & Calcium Chloride which is to be funded by internal accruals generated from its IPO. The expanded capacity is estimated to be operational from FY 17 which will boost the top line two years down the line. Assuming the fixed asset turnover ratio remains at 3.57 and with the above capex expansion, it is estimated to generate an additional 250cr of revenues in the next two financial years. Pushkar is well- equipped to handle the effluents generated from the amplified processes in the future.

International tie-ups:
The company has tied up with Huntsman Corporation (a MNC) to manufacture its patented products on a margin basis. As Huntsman faced unsuitable conditions in Spain, it had to shift the production to India. Pushkar will be supplying 160 MT of dyes and dyes intermediaries to Huntsman from Q12017, a deal wherein, it is not obligated to sell to Huntsman, but Huntsman is obliged to buy from Pushkar for next 3 years.

Financials:

  • Shown a decent growth of 20% Y-o-Y revenues with a 5 year CAGR of 15.34%.
  • Maintained a decent EBITDA margin of 11.84% and is expected to further expand to 15 – 15.9%.
  • Increased the PAT margin over the years with a 5 year PAT CAGR of 46.65%.
  • It is a debt free company and has a healthy Cash Flow from Operations of Rs. 49.68cr which is expected to increase further.
  • Fixed asset turnover ratio is 3.57x which is going to remain stable for next two FYs.
  • It has a cash conversion cycle of 85 days which was earlier 120 days. Overall, this has helped improve the working capital required by the company and is expected to remain stable hereon.
  • Post tax ROCE of the company stands at 16.29% which is expected to grow to 21.51% by FY17

Stock Data

CMP (Rs)
103.41
Face value (Rs)
10
52 Week Range (Rs)
59.00-121.00
Market cap (Rs Crores)
318.82
Price To Book Value (x)
1.85
P/E Ratio (x)
17.09
EV/EBIDTA (x)
10.71

One Year indexed Stock Performance

Shree Pushkar Chemicals & Fertilisers LtdSensex
Shree Pushkar Chemicals & Fertilisers Ltd
Performance (%)
1m
6m
12m
Absolute
7.27
-
-
Sensex
-3.03
-12.78
-11.08

Shareholders

(in %)
30-Sep
Promoter
60.27
FII
4.91
DII
12.65
Others
22.17
Total
100

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Industry

The Indian Dyestuff Industry, which was primarily started to cater to the needs of domestic textile industry, now not only meets more than 95% requirement of the domestic market, but has also made a dent in the global market gradually. Today, India exports dyes and dye intermediate to the very same countries, on which it was dependant for imports till a decade ago. All ranges of dyes such as disperse; reactive, vats, pigments and leather dyes are now being manufactured in India. This industry is based on chemicals derived from coal tar and the petrochemical industry. This industry forms an important link in the chain of other chemical industry such as textiles, leather, plastic, paper, packaging, printing inks, paints and polymers etc. The textile industry is the major consumer of dyestuffs and about 70% of the total production is consumed by this sector. The basic raw materials used for the manufacture of dyestuff are Benzene, Toluene, Xylene and Naphthalene (BTXN). These raw materials are initially transformed into dye intermediates by nitration, sulphonation, amination, reduction and other chemical unit process. Further, the formulation and reaction of the intermediates viz. diazotition and coupling of the intermediates are carried out for the manufacture of a particular dyestuff. The technology employed by the dyes sector has been well received in the International market.

Profile

Shree Pushkar Chemicals & Fertilisers Ltd. (formely known as Shree Pushkar Petro Products Ltd.), founded in 1994 is an established market leader in the manufacture of Dyes & Dyes Intermediates. They supply products to a global clientele including major Dyes producers and Merchant Traders and also serve their Customers as an integrator of small manufactures in India offering a "one stop" source of all their chemical requirements.

Profit & Loss Statement:- (Standalone)
(Rs Crores)
Particulars
Mar-13
Mar-14
Mar-15
Mar-16E
Mar-17E
Mar-18E
Income:-
  • Net Sales
  • Growth (%)
  • Total Expenditure
  • EBITDA
  • % Margin
  • Other Income
  • Operating Profit
  • Interest
  • PBDT
  • Depreciation
  • PBT
  • Tax
  • Tax Rate (%)
  • Profit After Tax
  • Margin (%)
  • PAT Growth (%)<
  • Adjusted EPS
  • 175.98
  • 16.77
  • 153.26
  • 22.72
  • 12.91
  • 0.59
  • 23.31
  • 10.28
  • 13.03
  • 4.05
  • 8.98
  • 1.73
  • 19.29
  • 7.25
  • 4.12
  • 35.32
  • 3.50
  • 210.09
  • 19.38
  • 180.92
  • 29.17
  • 13.88
  • 0.28
  • 29.45
  • 10.62
  • 18.83
  • 4.64
  • 14.18
  • 3.75
  • 26.42
  • 10.44
  • 4.97
  • 44.03
  • 5.04
  • 266.52
  • 26.86
  • 234.97
  • 31.55
  • 11.84
  • 0.29
  • 31.84
  • 5.42
  • 26.42
  • 3.63
  • 22.80
  • 4.15
  • 18.19
  • 18.65
  • 7.00
  • 78.73
  • 9.01
  • 266.00
  • -0.20
  • 224.43
  • 41.57
  • 15.63
  • 0.00
  • 41.57
  • 1.50
  • 40.07
  • 5.06
  • 35.01
  • 10.50
  • 30.00
  • 24.51
  • 9.21
  • 31.41
  • 8.11
  • 384.75
  • 44.64
  • 323.47
  • 61.28
  • 15.93
  • 0.00
  • 61.28
  • 1.50
  • 59.78
  • 8.11
  • 51.67
  • 15.50
  • 30.00
  • 36.17
  • 9.40
  • 47.60
  • 11.97
  • 541.50
  • 40.74
  • 457.85
  • 83.65
  • 15.45
  • 0.00
  • 83.65
  • 1.50
  • 82.15
  • 8.23
  • 73.92
  • 22.17
  • 30.00
  • 51.74
  • 9.56
  • 43.04
  • 17.12
Source: Stockaxis Research, Company Data

Valuation

Shree Pushkar Chemicals & Fertilizers has a competitive business model and after the recent expansion the company is set for the next level of growth both in terms of volumes and margins.

At CMP of Rs 96, the stock is trading at 5.60x to FY 2018E which is very low valuation for such growth oriented stock. We assign Buy rating on stock with target price of Rs 190 where it trades at 11.09x which is fair valuation for stock in long term.

 
 

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