Investment Memo: AKSHARCHEM

[s2If !current_user_can(access_s2member_level1)][lwa][/s2If] [s2If current_user_can(access_s2member_level1)]

Our Rating: HOLD

Mehabe score: 2
G Factor: 4
Piotski Score: 6
The stock has a rating HOLD. The mehabe team score is reflective of its fundamental and technical merits. A rating above 8 is considered good buy. The stock has a G-Factor of 4 and Piotski score of 6.

Description

AksharChem is one of the leading exporters of Vinyl Sulphone, accounting for 45% share of the country’s exports and also one of the world’s largest CPC Green pigment manufacturer with a global market share of 10% #
The company is one of the fastest-growing vinyl sulphone manufacturers in India.
AIL is promoted by Mrs. Paru M. Jaykrishna with vast experience of nearly three decades in the chemical industry (mainly dye-intermediates and pigments).
Mrs. Paru Jaykrishna (Chairperson and MD) and Mr. Munjal Jaykrishna (Joint MD and CEO).

Main Points

Manufacturing Capacity
AksharChem (India) Limited is one of India’s leading dyes and pigments manufacturing company with a capacity of 11,400 MTPA #
Vinyl sulphone has a capacity of 7800 MTPA with the utilization of 79% as of FY20
H Acid has a capacity of 1200 MTPA with the utilization of 96% as of FY20
CPC Green has a capacity of 2400 MTPA with the utilization of 78% as of FY20.Site: AKSHARCHEM

Technical Analysis

• Stock trades at 365.0, above its 50dma 280.87. It also trades above its 200dma 252.47. The stock remains bullish on techicals
• The 52 week high is at 375.95 and the 52week low is at 188.00

Price Chart

P/E Chart

Sales and Margin

Strengths

– has reduced debt.
– is almost debt free.
-Stock is trading at 1.11 times its book value

Weakness

– The company has delivered a poor sales growth of 5.42% over past five years.
– has a low return on equity of 9.40% for last 3 years.
-Dividend payout has been low at 13.45% of profits over last 3 years

Competition

– The industry trades at a mean P/E of 25.3x. Atul trades at the industry’s max P/E of 39.99x. AKSHARCHEM trades at a P/E of 23.5x
– Industry’s mean G-Factor is 4.2 while the mean Piotski score is 7.0. AKSHARCHEM has a G-Factor of 4 and Piotski scoreof 6.
– Average 1 month return for industry is 10.5%. The max 1- month return was given by Kiri Industries: a return of 25.02 %

Quarterly Results

• Sales for period ended Mar 2021 is Rs 75.3 cr compared to Rs 69.69 cr for period ended Mar 2020, a rise of 8.0%
• Operating Profits reported at Rs 9.1 cr for period ended Mar 2021 vis-vis 10.22 for period ended Mar 2020 .
• Operating Margins contracted -258.0 bps for period ended Mar 2021 vis-vis Mar 2020 .
• The EPS for Mar 2021 was Rs 6.79 compared to Rs 4.08 for previous quarter ended Dec 2020 and Rs 7.08 for Mar 2020

Profit & Loss Statement

Profit&Loss Comments

• Company reported sales of Rs 246.0 cr for period ended Mar 2021 vis-vis sales of Rs 260.0 cr for the period ended Mar 2020, a fall of 5.7%. The 3 year sales cagr stood at -2.3%.
• Net Profit reported at Rs 12.0 cr for period ended Mar 2021 vis-vis sales of Rs 16.0 cr for the period ended Mar 2020, falling 33.3%.
• Company reported a poor Net Profit CAGR of -27.1% over the last 3 years

Balance Sheet Statement

Cash Flow Statement

Cash Flow comments

Sales Growth

Profit Growth Statement

Profit Growth Statement

Stock Price CAGR

Return of Equity

General Comments

– The stock has given a return of 76% on a 1 Year basis vis-vis a return of -15% over the last 3 Years.
– The compounded sales growth on a TTM bassis is -11% vis-vis a compounded sales growth of 2% over the last 3 Years.
– The compounded profit growth on a TTM basis is -6% vis-vis a compounded profit growth of -32% over the last 3 Years.

Ratios

Shareholding Pattern

– FII shareholding has remained largely constant. The Mar 2021 fii holding stood at 1.43% vis-vis 1.43% for Dec 2020
– Public shareholding has remained largely constant. The Mar 2021 public holding stood at 35.82% vis-vis 34.26% for Dec 2020

Conclusion

– has reduced debt.
– is almost debt free.
-Stock is trading at 1.11 times its book value – The company has delivered a poor sales growth of 5.42% over past five years.
– has a low return on equity of 9.40% for last 3 years.
-Dividend payout has been low at 13.45% of profits over last 3 years

• The business fundamentals of the stock remain stable. Stronger near term results will build interest in the stock. We suggest to wait for a upturn in business performance.
• Technically, the stock remains above its 50 DMA 280.87 and is trading at 365.0, thus bullish price action wise.
• Thus, overall we retain a HOLD on the stock.

[/s2If]
Join Our Telegram Group