Diversified chemical player

Pigments and agrochemicals account for ~66% revenue

Aug 20, 2015 10:08 IST India Infoline Research Team

Robust margin drives net profit
Meghmani Organics (MOL) reported modest 8.3% yoy growth in Q1 driven strong growth in pigments and agrochemical business. Agrochemicals and pigments benefitted from increased capacity utilization which resulted in strong volume growth and robust margins. Basic chemicals reported subdued growth due to lower volume and realizations. Pigments accounted for ~35% of revenue followed by agrochemicals (~31%) and basic chemicals (26%). Margins expanded by ~425bps yoy as COGS and other expenses declined by ~260bps and ~190bps yoy respectively. Robust margin growth resulted in strong ~ 130% yoy increase in PBT but higher tax rate suppressed PAT growth to ~92%.    
 
Focus on capacity utilization; No major capex for 2 years
New caustic potash facility with capacity of 60 TPD will commence production at Dahej plant by Q3. Company invested Rs. 65cr through internal accruals for this capacity expansion. Exports business increased 9% yoy driven by 16% growth in pigments exports and 12% growth in agrochemicals exports. Domestic business reported modest 8% yoy growth driven by ~15% yoy growth in agrochemical business. Pigments and agrochemicals business reported ~10ppts growth in utilization but for basic chemicals it declined due to increased capacity. MOL is focusing on increasing capacity utilization at existing plants and expects no major capex in next 2 years. Company plans to increase exports revenue from untapped markets such as Japan.  
 
Revenue mix
Revenue mix Q1 FY16 % sales Q1 FY15 % sales
Pigment 124 35 112 34
Agrochemical 112 31 100 30
Basic chemicals 93 26 86 26
Other 31 8 34 10
Source: Company, India Infoline Research
 
Result table
(Rs cr) Q1 FY16 Q1 FY15 % yoy
Net sales 339 313 8.3
RM & packing (181) (174) 4.0
Purchase of traded goods (11) (11) (4.3)
Staff (19) (17) 15.0
Other expenditure (60) (61) (2.4)
Operating profit 68 50 37.0
OPM (%) 20.2 16.0 423 bps
Depreciation (19) (20) (5.0)
Interest (18) (18) 1.1
Other income 0 2 -
PBT 32 14 129.6
Tax (13) 0 -
Effective tax rate (%) 40.3 (1.4) -
Minority Interest (4) (6) -
Reported PAT 15 8 91.9
Source: Company, India Infoline Research
 


Meghmani Organics Ltd. - Consolidated
Peer comparison and Financial analysis

Peer Comparison

Particulars M Cap (Rs cr) PAT (Rs cr) EPS (Rs) P/E (x) EV/EBIDTA(x) P/BV (x) D/E (x) RoE (%) RoCE (%)
MAN
UPL Ltd. 22,598 1,166 26.7 19.8 10.6 3.9 0.6 21.0 21.7
PI Industries Ltd. 9,011 188 18.0 36.6 21.9 10.1 0.2 30.8 35.2
Rallis India Ltd. 5,197 160 8.1 33.1 18.8 6.4 0.2 20.9 26.9

Financials

Income statement

Y/e 31 Mar (Rs Cr) FY12 FY13 FY14 FY15
Revenue 1,062 1,058 1,178 1,294
Operating profit 158 186 168 191
Depreciation (75) (75) (80) (75)
Interest expense (74) (64) (68) (75)
Other income 12 13 34 18
Profit before tax 23 59 54 60
Taxes (19) (30) (18) (14)
MINORITIES 0 (11) (13) (2)
Adj. profit 4 29 36 46
Exceptional items 0 (1) 0 0
Net profit 4 28 35 46
Equity Dividend 3 3 3 21
Equity Dividend tax 0 0 0 4
Total payout 3 3 3 25

Balance sheet

Y/e 31 Mar (Rs Cr) FY12 FY13 FY14 FY15
Equity capital 25 25 25 25
Preference capital 0 0 0 0
Reserves 451 477 493 526
Net worth 476 502 518 552
Minority interest 57 80 92 94
Debt 697 638 623 510
Deferred tax liab (net) 1 20 37 47
Total liabilities 1,230 1,239 1,271 1,203
Fixed assets 741 784 806 794
Intangible assets 1 4 9 11
Investments 20 25 1 18
Deferred tax asset (net) 0 0 0 0
Net working capital 425 417 418 365
Inventories 172 181 250 216
Sundry debtors 333 339 352 317
Other current assets 175 197 208 174
Sundry creditors (112) (146) (174) (143)
Other current liabilities (143) (154) (219) (198)
Cash 44 10 37 16
Total assets 1,230 1,239 1,271 1,203

Cash Flow Statement

Y/e 31 Mar (Rs Cr) FY12 FY13 FY14 FY15
Profit before tax 23 59 54 60
Depreciation 75 75 80 75
Tax paid (19) (30) (18) (14)
Working capital 8 9 (1) 52
Other operating items 0 0 0 0
Operating cashflow 86 113 116 173
Capital expenditure (106) (122) (108) (64)
Free cash flow (20) (9) 8 109
Equity raised (19) 1 (16) 13
Investments 16 (5) 24 (17)
Debt financing/disposal 38 (59) (14) (113)
Dividends paid (3) (3) (3) (25)
Other items 10 30 16 10
Net in cash 22 (45) 15 (24)

Key ratios

Y/e 31 Mar FY12 FY13 FY14 FY15
Growth matrix (%)
Revenue growth 1.6 (0.4) 11.3 9.8
Op profit growth 7.4 17.3 (9.7) 14.1
EBIT growth 8.8 28.4 (1.3) 10.7
Net profit growth (88.3) 728.2 23.3 28.4
Profitability ratios (%)
OPM 14.9 17.6 14.2 14.8
EBIT margin 9.1 11.7 10.3 10.4
Net profit margin 0.3 2.8 3.1 3.6
RoCE 7.9 10.0 9.7 10.9
RoNW 0.7 6.0 7.1 8.6
RoA 0.2 1.9 2.2 2.9
Per share ratios (Rs)
EPS 0.1 1.1 1.4 1.8
Dividend per share 0.1 0.1 0.1 0.8
Cash EPS 30.7 41.0 45.7 47.5
Book value per share 18.7 19.7 20.4 21.7
Payout (%)
Dividend payout 83.9 10.2 8.3 55.0
Tax payout 84.4 50.6 33.6 23.2
Liquidity ratios
Debtor days 114 117 109 89
Inventory days 59 62 77 61
Creditor days 38 50 54 40
Valuation ratios (x)
P/E 153.8 18.6 15.1 11.7
P/CEPS 6.9 5.2 4.7 4.5
EV/EBDITA 7.5 6.3 6.7 5.4
P/BV 1.1 1.1 1.0 1.0

Du Pont Analysis

Y/e 31 Mar FY12 FY13 FY14 FY15
Tax burden (x) 0.16 0.49 0.66 0.77
Interest burden (x) 0.24 0.48 0.44 0.45
EBIT margin (x) 0.09 0.12 0.10 0.10
Asset turnover (x) 0.72 0.70 0.74 0.81
Financial leverage (x) 3.03 3.09 3.14 3.00
RoE (%) 0.7 6.0 7.1 8.6

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