Chemplast Sanmar Ltd -Multibagger Stock Analysis 2023
In this article, we can see Chemplast Sanmar Ltd as a Potential Multibagger Stock as on October 2023.
Chemplast Sanmar Ltd
It is a major manufacturer of specialty chemicals such as Specialty Paste PVC resin and Custom Manufactured Chemicals for the agrochemical, pharmaceutical, and fine chemicals sectors. Vijay Sankar is the current Chairman and non-executive director. Ramkumar Shankar is the current Managing Director.
Specialty chemicals (22%)
- Specialty paste PVC resin capacity: 66’000 MTPA
- Custom manufacturing: capacity of 1,068 MTPA
- #1 manufacturer of S-PVC in South India and 2nd largest in India
- End-user industry: Paste PVC- predominantly leather cloth followed by mats, gloves, etc.
Custom Manufacturing- Agri and Pharma innovators.
Non-specialty chemicals (17%)- Caustic soda
capacity: 119,000 MTPA
– Hydrogen peroxide capacity: 34,000 MTPA
– Chloromethane capacity: 35,000 MTPA
– #4 manufacturer of Caustic Soda in South India and #1 manufacturer of Hydrogen Peroxide in South India
– End-user industry: paper, textile, chemicals, agrochemicals, etc.
Manufacturing facilities and product portfolio Mettur:
Paste PVC, caustic soda, hydrogen peroxide, chloromethane, refrigerant gas
Berigai: Multi-purpose plants for the custom manufacturing division
Karaikal: Caustic soda
Cuddalore: Suspension PVC resin.
Miscellaneous
– All plants have zero liquid discharge.
– Has captive power plants of 48.5 MW in Mettur and 12 MW in Karaikal
– Have desalination plants in Karaikal and Cuddalore
– Leased a salt field at Vedaranyam (from the Government of Tamil Nadu) with approval to extract up to 400 kt of salt per annum.
Website
Location
Chemplast sanmar is headquartered in Hyderabad. The company had branches in Mumbai, Delhi, Kochi, Pune and Kolkata. The manufacturing facilities are located at Mettur, Berigai, and Vedaranyam in Tamil Nadu and Karaikal in the Union Territory of Puducherry.
Leaders
Vijay Sankar is the current Chairman and non-executive director. He has been associated as Director of our Company since April 2021. He was on the board of directors of the Company during the period from June 1999 to July 2004. He is an associate member of the ICAI. He is also the Honorary Consul General of Denmark, Chennai with jurisdiction over the States of Tamil Nadu, Andhra Pradesh, Telangana, Kerala, Karnataka and the Union Territory of Puducherry. He had earlier served as the Honorary Consul of Spain in Chennai for close to 10 years. He was the president of Indian Chemical Council from 2018 – 2020 and currently serves as the vice president of the Tamil Nadu Tennis Association. He is an industrialist and has several years of experience in managing several businesses. He is on the boards of companies such as The KCP Limited, Oriental Hotels Limited, Kaveri Retreats and Resorts Limited and Transport Corporation of India Limited.
Ramkumar Shankar is the current Managing Director. He has been associated as the Managing Director of the Company since February 2021. He is also the managing director of CCVL since April 2020 and has been heading the chloro–vinyl business of the Company since 2013.He is also a qualified chartered accountant and a cost accountant. Presently, he is a member of the CII National Committee on Chemicals and Petrochemicals 2020 – 21, co – opted member of the general committee 2020 – 21 of the Madras Chamber and was a president of Alkali Manufacturers Association of India. He has several years of experience in the chloro-vinyls business.
Chandran Ratnaswami is the current Non – Executive Director. He has been associated as a Director of our Company since April 2021. He holds a bachelors’ degree in technology (civil engineering) from the Indian Institute of Technology, Madras and a masters’ degree in business administration from University of Toronto.He is the chief executive officer of Fairfax India Holdings Corporation, a company listed on the Toronto Stock Exchange, and a managing director of Hamblin Watsa Investment Counsel Limited. He brings over several years of experience in investment sector.
Dr. Lakshmi Vijayakumar is the current Independent Director. She has been associated as Director of the Company since April 2021. She holds a bachelors’ degree in medicine, bachelor of surgery from the Madras University and a post graduate diploma in psychological medicine from Thanjavur Medical College, University of Madras. She is registered as a medical practitioner with the Tamil Nadu Medical Council. She has been conferred the Honorary Fellowship of the Royal College of Psychiatrists and of the Collegium Regium Medicorum Edinburgense. She is registered with the Independent Directors’ Databank issued by the Indian Institute of Corporate Affairs. She has several years of experience in the medical sector. She is the founder of SNEHA, an NGO in Chennai and is an honorary associate professor in the University of Melbourne.
Sanjay Vijay Bhandarkar is the current Independent Director. He has been associated as the Director of our Company since April 2021. He holds a bachelors’ degree in commerce from University of Poona and has completed postgraduate diploma in management from XLRI Jamshedpur. He is registered with the Independent Directors’ Databank issued by the Indian Institute of Corporate Affairs. He is on the board of various companies including S Chand and Company Limited, The Tata Power Company Limited and HDFC Asset Management Company Limited. He has several years of experience in the corporate finance, advisory and investment banking sectors.
Highlights
- Profit After Tax (PAT) stood at ` 152 Crores.
- revenue growth of 26% in 2022-23.
- Overall, Chemplast’s balance sheet remains healthy and the Company maintains a net cash-positive position.
- capital expenditure strategy is currently laser-focused on the CMCD business, given the substantial growth prospects.
- The company intends to grow the specialty chemicals business further by enhancing existing capacities and diversifying into synergistic areas by capitalizing on our capabilities and longstanding customer relationships.
- The Company is also evaluating growth opportunities in allied product groups and will commit investments if the thresholds for revenue growth potential, margins, and ROI are met.
- With a healthy balance sheet, the Company believes it is well-positioned to capitalize on multiple growth opportunities, specifically in the specialty chemicals business.
- The Company has already committed over ` 1000 Crores of project capital expenditure for setting up a multi-purpose facility at our CMCD business and also enhancing the Speciality Paste PVC capacity by 62%.
- In the past year, CCVL (wholly-owned subsidiary of Chemplast) achieved a key milestone by successfully completing the debottlenecking of the Suspension PVC facility, enhancing the capacity by 31 ktpa. This wasdone with a minimal capex of ` 23 Crores.
Products & Services
- Specialty paste PVC resin
- Custom manufactured chemicals
- choro chemicals
- Hydrogen peroxide
Profit & Loss
Expansions
- The co. is investing over Rs. 1,000 Crores towards expanding capacities in the Speciality Paste PVC and Custom Manufactured Chemicals Division. These expansion projects are anticipated to be commissioned during 2023-24.
- The 41 ktpa Speciality Paste PVC project is to be commissioned in the second half of 2023-24.
- While Phase 1 of the CMCD facility is scheduled to commence operations in the first half of 2023-24, the next phase is expected to be operationalized by the end of 2023-24.
- Leveraging the existing land and infrastructure facilities, the Company is increasing the capacity of Speciality Paste PVC production by 41,000 tonnes per annum at an estimated outlay of
360 Crores and setting up a multi-purpose facility for Custom Manufactured Chemicals in a phased manner at an overall estimated outlay of680 Crores. - The Speciality Paste PVC project at SIPCOT Industrial Complex, Phase II, Cuddalore is expected to be commissioned in the second half of FY 2023-24 and phase I of the multi-purpose facility for Custom Manufactured Chemicals at Berigai, Krishnagiri District, is expected to be commissioned by second quarter of 2023-24.
Positives
- Earnings are forecasted to grow 94.57% per year.
Negatives
- Though the company is reporting repeated profits, it is not paying out dividend
- Company has low interest coverage ratio.
- Earnings include an other income of Rs.103 Cr.
- High level of non-cash earnings.
- profit margins(0.8%) are lower than last year(9.3%)
Warren Buffett Checklist
| Factor | Value |
| Economic Moat | Moderate |
| Growth | Moderate |
| Valuation | High |
| Debt | Moderate |
| Integrity | Good |
Summary
Based on above evaluation the company have low multibagger properties.
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