fbpx
Is Meghmani Organics a Multibagger Stock based on Warren Buffet?

Is Meghmani Organics a Multibagger Stock based on Warren Buffet?

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.

Meghmani Organics

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.

Website: http://www.meghmani.com/

CMP: 60.00

Meghmani Organics Multibagger Stock

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.

Positive Factors

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.

image

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.

Sales Growth

image

Profit Growth

image

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%

Concern Factors

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 FlowYes.

 

 

Recent Year, Revenue Growth 49%, PAT Growth 95%

New Plant commissioning on the way.

image
Durable Competitive Advantage Moderate.image
Future Growth DriversModerate.

 

 

Sector outlook is Good due to Chinese De-regulations.

image
Conservative Debt (long term debt < 3 Net Profit)Not.image
Debt Equity Ratio, Current Ratio0.44, 2.31image
Return on Equity must be Above Average21%image
Low CAPEX required to maintain current operationsModerateimage
Management is holding / buying the stock48%. Increasing.image
Price is Under Valued (< intrinsic value)

Yes.

As per the Intrinsic Value Calculator taking moderate growth of 50%, the company is at discount of 80%.

image
Stock Price is consolidating (now)

Yes.

(due to bear market in smallcap & micaps)

image
Stock Price is growing in past years along with EPS growthYes.image

Additional Futurecaps Checklist

Consolidated PE, PB, PEG Ratio

PE 6, PB 2, PEG 0.11

(PE is very low)

image
Cash Flow Positive, Net Profit % greater than 8%Yes. Yes.image
Paying Dividends, TaxDividends: No, Tax: Yesimage
EPS Growth Rate50%. Very Aggressiveimage
Jump in Trailing Result EPSYes.image
Jump in Quarterly Result EPSYes.image
Expected Gain in 5 Years5-10 Timesimage
Price Movement Graph, 52 Week High & Low30/6image
Volume Analysis6 lakh (High)image
Power of BrandModerate.image
Corporate Governance, Reputation of LeadersFew issues on MFL promoter stake sale exists.image
Fraud reportedYes. Duty Evasion Arrest. linkimage
Celebrity InvestorsYesimage

Declaration

Definitely the company possess Multibagger properties at the current price.  But, be cautious about the Management alerts.

image

Note

This is part of Free Multibaggers plan which do not include Tracking & Updates.  I would encourage serious investors to buy our Paid Subscription plan.

futurecaps-subscription

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.

 

 

About Futurecaps

Futurecaps is a 12+ year experienced Indian Stock Market Advisory with SEBI Registration.

NEVER MISS our 5-Paid-Multibaggers which are Hand-picked using Warren Buffet strategies!

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: