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Investment Rationale OSCL’s products cater to industries like pharmaceutical, chemical, glass, cosmetics, ceramic pigments and cattle & poultry feeds. Iodine and Selenium derivatives are its prime products contributing around 80% of sales in FY10.
To enhance its product mix, new range of products in Metal oxides would be added post-expansion to cater to the needs from new and various industry segments.
The company proposes to foray into CRAMS business for which it has taken a 99.82% stake in Rishichem Research ltd. for INR 13mn in FY10. It is expected to contribute to revenues by FY12E.
Investment Concerns Any decline in revenues from Iodine & Selenium derivatives will adversely affect the financial performance and business operations. Sales to top 10 customers accounted for 58% in FY10 and H1FY11. Any change in customer priority or relationship would adversely affect the operations as well as financial performance.
Valuation & Recommendation
At the upper band of INR 98, the stock is available at a P/E and P/BV multiple of 37.5x and 2.0x based on its FY10 EPS of INR 2.6 and post issue BVPS of INR 48.6. The issue seems quite expensive based on current peer group valuations.
Augmenting Product Mix
At present OSCL’s product portfolio comprises of more than 90 products in organic, inorganic and organo inorganic intermediates. The proposed expansion will enable it to increase its product range and cater to the various industry segments.
With the proposed expansion, the company will be able to expand its product lines in Selenium, Molybdenum, Cobalt, Bismuth etc.
Further, a new range of products in Metal oxides such as Cobalt Oxide, Molybdenum Trioxide, Molybdenum Disulfide, etc. will be added to its product portfolio.
Scaling Up Exports
OSCL currently exports its products to Europe, Asia,
North America, South America and Australia. The exports constituted 12.35% of the total sales for FY09 and 7.97% of the total sales for FY10.
Company Background
OSCL is primarily involved in the manufacture and sale of speciality chemicals viz. selenium compounds, iodine compounds, molybdenum compounds etc. and pharma intermediates viz. Potassium Iodate, Bismuth Ammonium Citrate, Bromoform etc.
It manufactures a range of organic, inorganic and organo inorganic intermediates. Iodine & Selenium derivatives are its key products constituting 88% of gross sales during FY10.
The company’s plants are situated at Thane, Maharashtra presently having a capacity of 750mtpa.
Financial Highlights
Sales increased by 58% from INR 457mn in FY08 to INR 723mn in FY10.
EBITDA grew by 108% from INR 63mn in FY08 to INR 131mn in FY10.
PAT increased to INR 51mn in FY10 from INR 26mn in FY08.
Industry Overview
Speciality Chemicals Industry
Speciality chemicals are relatively high value, low volume chemicals known for their end-use applications and catalysing properties. The industry size is about US$ 15bn and in India, the industry is recording a rapid growth of approximate 15% y-o-y. The industry includes fine chemicals, organic chemicals and pharmaceutical intermediates.
Pharmaceutical Intermediates Market
API’s are the key ingredients for making drugs and India’s emergence as a hub for manufacturing of pharmaceuticals (APIs) has been the key driver for the growth in the speciality chemicals market. Approximately 90% of the total APIs produced in India is exported to Europe, the US and Japan.
Pharmaceutical intermediates will account for over 2/3rd of the speciality chemicals market by the year 2012. Indian speciality chemical manufacturers have the technical expertise and R&D capabilities to produce niche, complex and high-quality intermediates belonging to the pharma sector.
Promoter Background
Mr. Pravin Herlekar, aged 61 years, is the Chairman and Managing Director of the Company. He has an overall experience of 27 years in the field of Product Development, Marketing and Administration. Over the years he has been successful in expanding the customer base in Europe, North America, Asia, South America & Australia.
Mr. Omkar Herlekar, aged 29 years, is the Whole Time Director of the Company. He looks after the Research & Development activities of the Company and supervises the entire factory operations. He is actively involved in the setting up and implementation of new manufacturing units.
Valuation & Recommendation
At the upper band of INR 98, the stock is available at a P/E and P/BV multiple of 37.5x and 2.0x based on its FY10 EPS of INR 2.6 and post issue BVPS of INR 48.6. Capacity expansion will help the company to expand its product line as well as increase its geographical presence. However, the issue seems quite expensive based on current peer group valuations.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Omkar Speciality Chemicals Limited (OSCL) is engaged in manufacturing and sale of specialty chemicals. The company currently operates through 2 manufacturing units located in Maharashtra with a capacity of 750mtpa.
Valuation
At the upper band of INR 98, the stock is available at a P/E and P/BV multiple of 37.5x and 2.0x based on its FY10 EPS of INR 2.6 and post issue BVPS of INR 48.6. The issue seems quite expensive based on current peer group valuations.Omkar Speciality Chemicals Limited (OSCL) is engaged in manufacturing and sale of specialty chemicals. The company currently operates through 2 manufacturing units located in Maharashtra with a capacity of 750mtpa.Investment Rationale OSCL’s products cater to industries like pharmaceutical, chemical, glass, cosmetics, ceramic pigments and cattle & poultry feeds. Iodine and Selenium derivatives are its prime products contributing around 80% of sales in FY10.
To enhance its product mix, new range of products in Metal oxides would be added post-expansion to cater to the needs from new and various industry segments.
The company proposes to foray into CRAMS business for which it has taken a 99.82% stake in Rishichem Research ltd. for INR 13mn in FY10. It is expected to contribute to revenues by FY12E.
Investment Concerns Any decline in revenues from Iodine & Selenium derivatives will adversely affect the financial performance and business operations. Sales to top 10 customers accounted for 58% in FY10 and H1FY11. Any change in customer priority or relationship would adversely affect the operations as well as financial performance.
Valuation & Recommendation
At the upper band of INR 98, the stock is available at a P/E and P/BV multiple of 37.5x and 2.0x based on its FY10 EPS of INR 2.6 and post issue BVPS of INR 48.6. The issue seems quite expensive based on current peer group valuations.
Investment Rationale
Expanding Facility
OSCL intends to utilize INR 468mn to add another 2700mtpa of manufacturing capacity by FY13E. Currently, the company operates with a capacity of 750mtpa. A 3rd unit, setup by internal accruals, having an installed capacity of 200MT is expected to come online by March 2011.
Further, the company proposes to set up a new manuacturing unit with an installed capacity of 1250mtpa at an outlay of INR 322mn., expected to come online by FY13E.
The company also proposes to expand its existing capacities by an additional 1450mtpa at a cost of INR 146mn.
Augmenting Product Mix
At present OSCL’s product portfolio comprises of more than 90 products in organic, inorganic and organo inorganic intermediates. The proposed expansion will enable it to increase its product range and cater to the various industry segments.
With the proposed expansion, the company will be able to expand its product lines in Selenium, Molybdenum, Cobalt, Bismuth etc.
Further, a new range of products in Metal oxides such as Cobalt Oxide, Molybdenum Trioxide, Molybdenum Disulfide, etc. will be added to its product portfolio.
Scaling Up Exports
OSCL currently exports its products to Europe, Asia,
North America, South America and Australia. The exports constituted 12.35% of the total sales for FY09 and 7.97% of the total sales for FY10.
Company Background
OSCL is primarily involved in the manufacture and sale of speciality chemicals viz. selenium compounds, iodine compounds, molybdenum compounds etc. and pharma intermediates viz. Potassium Iodate, Bismuth Ammonium Citrate, Bromoform etc.
It manufactures a range of organic, inorganic and organo inorganic intermediates. Iodine & Selenium derivatives are its key products constituting 88% of gross sales during FY10.
The company’s plants are situated at Thane, Maharashtra presently having a capacity of 750mtpa.
Financial Highlights
Sales increased by 58% from INR 457mn in FY08 to INR 723mn in FY10.
EBITDA grew by 108% from INR 63mn in FY08 to INR 131mn in FY10.
PAT increased to INR 51mn in FY10 from INR 26mn in FY08.
Industry Overview
Speciality Chemicals Industry
Speciality chemicals are relatively high value, low volume chemicals known for their end-use applications and catalysing properties. The industry size is about US$ 15bn and in India, the industry is recording a rapid growth of approximate 15% y-o-y. The industry includes fine chemicals, organic chemicals and pharmaceutical intermediates.
Pharmaceutical Intermediates Market
API’s are the key ingredients for making drugs and India’s emergence as a hub for manufacturing of pharmaceuticals (APIs) has been the key driver for the growth in the speciality chemicals market. Approximately 90% of the total APIs produced in India is exported to Europe, the US and Japan.
Pharmaceutical intermediates will account for over 2/3rd of the speciality chemicals market by the year 2012. Indian speciality chemical manufacturers have the technical expertise and R&D capabilities to produce niche, complex and high-quality intermediates belonging to the pharma sector.
Promoter Background
Mr. Pravin Herlekar, aged 61 years, is the Chairman and Managing Director of the Company. He has an overall experience of 27 years in the field of Product Development, Marketing and Administration. Over the years he has been successful in expanding the customer base in Europe, North America, Asia, South America & Australia.
Mr. Omkar Herlekar, aged 29 years, is the Whole Time Director of the Company. He looks after the Research & Development activities of the Company and supervises the entire factory operations. He is actively involved in the setting up and implementation of new manufacturing units.
Valuation & Recommendation
At the upper band of INR 98, the stock is available at a P/E and P/BV multiple of 37.5x and 2.0x based on its FY10 EPS of INR 2.6 and post issue BVPS of INR 48.6. Capacity expansion will help the company to expand its product line as well as increase its geographical presence. However, the issue seems quite expensive based on current peer group valuations.
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