In this post I would like to provide Multibagger Analysis on Meghmani Organics Ltd (BSE 532865, NSE MEGH.NS).
Note This is part of our Free-multibagger Analysis which will not have any tracking & updates. I would recommend you buying our serious list of Paid-multibaggers subscription plan here.
Founded in 1986, Meghmani Organics is a leading manufacturer of pigments, agrochemicals and basic chemicals. The company has show tremendous record of growth & expansion.
Mr. Ankit Patel is the current Chief Executive Officer.
During 2017-18 Meghmani Organics has clocked year-onyear growth of 27% in Revenue, 49% in EBITDA and 95% in PAT. Better monsoon, focus on high margin product mix, better capacity utilization has led to fuel for continued growth. The company has 3 high growth businesses in one company. i.e. Pigments, Agrochemicals and Basic Chemicals
Company is witnessing aggressive expansion in scale across each business, accompanied with backward integration, large client base with significant repeat business, strong product bouquet and wide global presence.
During the past year, the production crossed 2 Lakh MT while utilization levels increased to 84%. Our consolidated net Sales were ₹17,747 mn compared to ₹13,963 mn in FY17 buoyed by strong performance in exports as well as in the Domestic market. Exports saw 29% growth while Domestic market increased by 25%. Company strategy of expanding our diversified product portfolio,with focus on higher-value products, spurred EBITDA for the period by 49% to ₹4,312 mn resulting in 360 bps expansion in EBITDA Margin to 24.3%. On the back of vertically integrated business model, we effectively managed fluctuating raw material costs in the market and boosted our profitability. PAT for the year almost doubled to reach ₹1,713 mn as compared to ₹877 mn last year with PAT Margin reaching 9.7%. Interest cost declined by 22% on account of repayment of debt by ₹751 mn during the year.
Company enjoys 14% share of Copper Phthalocyanine market. Being an Exporter it enjoyed Revenue Increase through the US Dollar – Indian Rupee Depreciation.
Accelerated by Chemical regulation in China.
Company have 5 subsidiaries.
Global Pigments market to be growtn 4.1% CAGR and reach $27 billion by 2023. This will give immense potential to the commpany coupled with the large capex plan initiated last year.
Last year, Meghmani Organics initiated a landmark capex plan involving investment of ₹6.4 bn. The capex involves three projects starting with the Chlormthane (CMS) Project, already at the construction level, is expected to be commissioned by December’18. For the Second and Third project, involving expansion of Caustic Soda and Hydrogen Peroxide, we have finalized the technology and signed the agreement for the Power Plant. Both are expected to be commissioned by June’19.
ROCE of the company increased to 32% from previous year 21%
Due to the low awareness in indian farmers the usage of Meghmani products is decelerated.
Increasing global competition, forex variations, global standards variation are other threats the company faces.
There are few corporate governance issues due to promoters faced by Meghmani Organics.
China coming back with pulling De-regulations on Chemicals can impact the Profitability of the company
Warren Buffett Checklist
|History of Consistently Increasing Sales, Earnings & Cash Flow||Yes.|
Recent Year, Revenue Growth 49%, PAT Growth 95%
New Plant commissioning on the way.
|Durable Competitive Advantage||Moderate.|
|Future Growth Drivers||Moderate.|
Sector outlook is Good due to Chinese De-regulations.
|Conservative Debt (long term debt < 3 Net Profit)||Not.|
|Debt Equity Ratio, Current Ratio||0.44, 2.31|
|Return on Equity must be Above Average||21%|
|Low CAPEX required to maintain current operations||Moderate|
|Management is holding / buying the stock||48%. Increasing.|
|Price is Under Valued (< intrinsic value)|
As per the Intrinsic Value Calculator taking moderate growth of 50%, the company is at discount of 80%.
|Stock Price is consolidating (now)|
(due to bear market in smallcap & micaps)
|Stock Price is growing in past years along with EPS growth||Yes.|
Additional Futurecaps Checklist
|Consolidated PE, PB, PEG Ratio|
PE 6, PB 2, PEG 0.11
(PE is very low)
|Cash Flow Positive, Net Profit % greater than 8%||Yes. Yes.|
|Paying Dividends, Tax||Dividends: No, Tax: Yes|
|EPS Growth Rate||50%. Very Aggressive|
|Jump in Trailing Result EPS||Yes.|
|Jump in Quarterly Result EPS||Yes.|
|Expected Gain in 5 Years||5-10 Times|
|Price Movement Graph, 52 Week High & Low||30/6|
|Volume Analysis||6 lakh (High)|
|Power of Brand||Moderate.|
|Corporate Governance, Reputation of Leaders||Few issues on MFL promoter stake sale exists.|
|Fraud reported||Yes. Duty Evasion Arrest. link|
Definitely the company possess Multibagger properties at the current price. But, be cautious about the Management alerts.
This is part of Free Multibaggers plan which do not include Tracking & Updates. I would encourage serious investors to buy our Paid Subscription plan.
Disclaimer Futurecaps is an independent equity research team. Use of the information herein is at Investor’s own risk. This is not an offer to sell or solicitation to buy any securities and Futurecaps will not be liable for any losses incurred for the investment based on the advice. The Investor is advised to do due diligence in the scrip mentioned. None of Futurecaps Advisors hold 1% above Holdings of this company.