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Investment Rationale
Omkar Specialty Chemicals Ltd (OSCL) is a unique play on pharmaceutical intermediates & speciality chemicals that find application in healthcare, glass, poultry feed, water treatment and agrochemicals among others. We call it unique as OSCL cannot be benchmarked to any comparable peers.
OSCL promoted by technocrat entrepreneur Pravin Herlekar has grown its revenues at a 5 year CAGR of 35% and is now in an expansion phase to expand capacities four fold and we expect revenues to grow at a CAGR of 45% over the next two years.
OSCL has recorded an impressive 100% growth in its headline net profit at `40 million during Q1FY‟12 on yoy basis, on the back of over 90% growth in revenues at `425 million as against `224 million during the corresponding period last year. On sequential basis, revenue growth stood at 36% against `311million and net profit grew by 34% from `30million during Q4‟FY11.
OSCL‟s product portfolio comprise of more than 80 products and with new product introductions and operating leverage due to the ongoing capacity expansion, we expect net profits to grow at a CAGR of more than 50% over the next two years.
Valuation
OSCL has reported strong financial performance in FY‟11 and would continue to grow at CAGR of 45% over the next 2-yrs (FY‟12E and FY‟13E) net profit is expected to grow at CAGR of 50% for the period under review. The higher growth trajectory will be supported by production boost from capacity expansion from 950mtpa to 3,650mtpa, along with robust demand for its products. Growing product offerings along with growth in end-user industries will lift its future revenues.
OSCL has successfully demonstrated its ability to grow its gross margins from 12% in FY‟06 to 20% in FY‟11. Given its consistent and proven track record in high margin molecules, we rate the stock as „BUY‟ at current market price of `59 with one year price target of `120. OSCL has P/BV of 1.2 and trades at 7xFY‟12E and 5xFY‟13E earnings.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Investment Rationale
Omkar Specialty Chemicals Ltd (OSCL) is a unique play on pharmaceutical intermediates & speciality chemicals that find application in healthcare, glass, poultry feed, water treatment and agrochemicals among others. We call it unique as OSCL cannot be benchmarked to any comparable peers.
OSCL promoted by technocrat entrepreneur Pravin Herlekar has grown its revenues at a 5 year CAGR of 35% and is now in an expansion phase to expand capacities four fold and we expect revenues to grow at a CAGR of 45% over the next two years.
OSCL has recorded an impressive 100% growth in its headline net profit at `40 million during Q1FY‟12 on yoy basis, on the back of over 90% growth in revenues at `425 million as against `224 million during the corresponding period last year. On sequential basis, revenue growth stood at 36% against `311million and net profit grew by 34% from `30million during Q4‟FY11.
OSCL‟s product portfolio comprise of more than 80 products and with new product introductions and operating leverage due to the ongoing capacity expansion, we expect net profits to grow at a CAGR of more than 50% over the next two years.
Valuation
OSCL has reported strong financial performance in FY‟11 and would continue to grow at CAGR of 45% over the next 2-yrs (FY‟12E and FY‟13E) net profit is expected to grow at CAGR of 50% for the period under review. The higher growth trajectory will be supported by production boost from capacity expansion from 950mtpa to 3,650mtpa, along with robust demand for its products. Growing product offerings along with growth in end-user industries will lift its future revenues.
OSCL has successfully demonstrated its ability to grow its gross margins from 12% in FY‟06 to 20% in FY‟11. Given its consistent and proven track record in high margin molecules, we rate the stock as „BUY‟ at current market price of `59 with one year price target of `120. OSCL has P/BV of 1.2 and trades at 7xFY‟12E and 5xFY‟13E earnings.
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