Seya Industries …Solid Multibagger

Company Name: Seya Industries (BSE Code: 524324)

Industry: Specialty Chemicals

Investment Horizon: 3 Years

Allocation: Allocate not more than 10% of your portfolio, at a CMP of 630 Range and can add on dips too

About the Company:

Seya Industries was incorporated in 1990 by Shri Ashok G Rajani. It is engaged in manufacturing of Organic chemicals. It specializes in manufacture of Chlorination and Nitration processed Benzene based products and aims to become the largest producer Benzene based Chemical intermediaries in the world

Seya’s manufacturing facilities are located in MIDC Tarapur, Maharashtra

Seya’s fully backward-Integrated Complex, spread across 2,00,000 square metersse driven by latest state-art-of technology

Client Base:

Its esteemed clients includes Clariant, HIL, Sudarshan, Micro inks, BASF, Aarti Drugs, Aarti Industries Ltd, Bayer, Atul.

Business Segments:

It is engaged in manufacturing and exporting of Pigment, Pharmaceuticals, Agrochemicals and Rubber Chemical intermediaries

Classification









Pigment Intermediaries
Chloro Benzenes
Nitro Chloro Benzenes
Acids

Outline:

With the intent to control the pollution, the Chinese government taken an initiation of shutting down of the biggest Chemical Manufacture company (Hubei Chuyuan) and some other companies in China which contributes more than 30% of Global Dye production – Which led to shortage of products in the markets

Simple Demand and Price concept again – Demand increased and Prices also increased simultaneously. The Chemical prices have gone up by more than 100% to which resulted in tremendous increase in top line in terms of both price growth and Volume growth

And maybe it will take some time for Chinese companies to recover

(As discussed in Akshar Chemicals)

Indian Specialty Chemicals to reach USD 80-100 billion by 2023

Indian pharmaceuticals market size is expected to grow to USD 100 billion by 2025
(Source: Investor Presentation)

Pros and Notable Points:
  • Good Management control system equivalent to ISO 9001:2000, ISO 14001:2004, OHSAS 18001:1999
  • Captive power generation to ensure continuous power
  • Backward and Forward integration, fully automated State of art manufacturing facilities towards aiming Cost efficiency
  • Focused R&D to develop new products from time to time and expanding its R&D in collaboration with Dept. of Scientific & Industrial Research (DISR) and National Chemical Laboratory promoted by Government of India
  • Strong Promoter Holding of 71% as on March 2017. Promoters are having sound Entrepreneurial Skills and Chemical Engineering Background
  • 100% FDI is allowed in Indian Chemicals sector
  • Low Equity base of Rs.1.1 Cr


It can Command a P/E of 40+ in the years to come (Mark my words)
  Cons:
  • Debt to Equity is approx. 2.9
  • Book Value is Rs.64, so it is trading at 9 times the book value (Even the competitors are trading at 5-10 times their book values)
  • It is trading at a P/E of 25
  • Trading in BSE only and Liquidity concern – 30 day average trading volume is at 3600 (Hope it will list in NSE too in the near future)



Financial Highlights:

Solid Numbers

  • Revenues are grown at a 65% CAGR from past 5 years
  • EBITDA is grown at a 45% CAGR from past 5 years
  • Net profit for the past three years is grown at 145%
  • Return on Equity for the past three years is at 23%
  • Operating Margins in the recent quarters is at 30%
  • Almost 90% revenue is coming from Speciality Chemicals
  • Low Equity base of Rs.1.1 Cr
  • Share Capital includes Non-convertible Redeemable Preference shares worth Rs.151 Cr
  • Debt to Equity is approx. 2.9. Debt is at But Long term Debt (Term Loans) is a Rs.90 Cr which is taken for Expansion project
  • Net Sale per share is Rs.300
  • Dividend pay-out is 10%
  • Company is going for aggressive expansion plans in the recent years which is visible from Cash flows from investing activities 
Narration
2012
2013
2014
2015
2016
2017
Sales
             28.39
               54.23
             131.31
             247.61
                275.28
             308.60
Expenses
             26.17
               48.87
             116.86
             214.14
                227.02
             234.71
Op Profit
               2.22
                 5.36
               14.45
               33.47
                  48.26
               73.89
OPM
               7.82
                 9.88
               11.00
               13.52
                  17.53
               23.94
Net profit
               0.88
                 1.82
                 3.36
               13.03
                  26.78
               42.06
EPS
               0.80
                 1.65
                 3.05
               11.85
                  24.35
               20.67
Price to earning
 
 
 
 
                    6.25
               30.65
Price
                    -  
                      -  
                      -  
                      -  
                152.25
             633.50

Rating:

Technical Rating – 74
Fundamental Rating – 88
Overall rating - 81

Valuation:  

With the investment horizon given, considering all the inputs of estimates the valuations are at Rs. 3450

(The valuations are calculated on the basis of financial inputs/estimates but investors are required to invest based on the business potential and business risks too) 

Note: Some of the information mentioned here is obtained through company website, annual reports and BSE official Website




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