Specialty Chemicals l BSE Research Ultramarine & Pigments Ltd. CMP: INR112.90 Stock data BSE code 506685 BSE ID ULTRAMAR Face value (INR) 2.0 No of shares (m) 29.2 Market cap (INRm) 3,296.7 3m avg. daily vol (No) 19,098.5 Free float (INRm) 1,582.7 Dividend yield FY15 (%) 2.7 S&P BSE Sensex 26,145.7 Stock performance (%) 52week H/L 119.8/60.0 1M 3M 12M Absolute (%) 16.6 56.2 52.5 Relative (%) 18.2 54.4 60.9 Shareholding pattern (%) Promoters FIIs DIIs Others 51.99% 0.00% 0.14% 47.87% Company Overview Established in 1960, Ultramarine & Pigments has its manufacturing facilities at Ambattur, Madras and Ranipet in North Arcot, Tamilnadu. It is the largest manufacturer of ultramarine blue and synthetic detergents. The company also manufactures ultramarine colours, organic and inorganic pigments, metal powders, chemicals, raw materials for the paint industry, varnishes, enamels, oils and plastics. The company was exporting to the Soviet Union. At present, the company exports its products the US and Europe. This is the only company in India to receive the ISO 9002 certification for both laundry and industrial grades of ultramarine blue. FY15 and recent performance Net sales in FY15 increased by 14.6% YoY to INR1,722.1m. Company reported operating profit of INR294.3m in FY15 against INR251.0m in FY14, mainly due to increase in sales. Ultramarine & Pigments Ltd. reported net profit of INR187.4m in FY15 compared to INR144.0m in FY14. Company declared a dividend of INR3.0 in FY15 In balance sheet, net fixed assets decreased from INR421.5m in FY14 to INR396.9m in FY15. Loans and advance and cash and cash bank balance was reported at INR261.4m and INR164.0m in FY15 respectively compared to INR186.4m and INR126.6m in FY14 respectively. Trade payables increased from INR74.8m in FY14 to INR1.3m in FY15. Relative stock movement Operating cash flow increased from INR169.5m in FY14 to INR232.6m in FY15. In Q2FY16, revenue increased by 25.5% YoY to INR549.5m. Ultramarine & Pigments Ltd. earned EBITDA of INR96.1m during the said period. Company reported net profit of INR71.3m in Q2FY16, increase by 57.4% on YoY basis. Table 1: Key financials (Consolidated) Source: BSE (Y/e March) FY13 FY14 FY15 Sales (INRm) 1,398.9 1,502.2 1,722.1 YoY Growth (%) 2.8 7.4 14.6 EBITDA (INRm) 9.0 251.0 294.3 Dec 15 EBITDA Margin (%) 14.9 16.7 17.1 PAT (INRm) 121.2 144.0 187.4 EPS (INR) 4.2 4.9 6.4 YoY Growth (%) 11.5 18.7 30.2 RoE (%) 14.4 16.1 19.6 P / E (x) 27.2 22.9 17.6
Industry Overview In terms of volume of production Indian chemical industry stood as 3 rd largest producer in Asia and 12 th in world. Indian chemical industry could grow at 14% p.a. to reach size of USD350bn by 21. Indian Chemical industry is 6 th in the world and 3 rd in Asia in value added terms at constant prices. Specialty chemicals are relatively high valued; their demand is rapidly growing, catering to a diverse endproduct market The Indian specialty chemicals market is estimated to reach USD60 to USD70bn by, from the current USD23bn. Board of Director Table 2: Composition of Board Name Director type Business relationship with company Mr. R. Sampath Director Chairman & Managing Director Mrs. Indira Sundararajan Director Vice Chairperson & Managing Director Mr. S. Sridhar Director Joint Managing Director Ms. Tara Parthasarathy Director Joint Managing Director Mr. S. Santhanam Director Non Executive Director Dr. G. G. Nair Director Non Executive Independent Director Mr. Nimish Patel Director Non Executive Independent Director Mr. T. R. Madhavan Director Non Executive Independent Director Mr. Vinod G. Nehemiah Director Non Executive Independent Director Mr. Navin M Ram Director Non Executive Independent Director Mr. S. Ragothaman Director Non Executive Independent Director Source: Company Key Strength and growth drivers Efforts to bring in more value added products in Pigment division. Utilization of the sulphonation plant capacity will also improve due to committed off take of sulphonated products by leading corporates. Renewed focus on improving the operational efficiency, broadening of customer base and enhancing the revenues of the domestic division. Risk and concern Shrinking demand for laundry and white washing applications, and slowdown in manufacturing sector. Erratic supply of Alpha Olefin due to fluctuations in crude pricing, which has an adverse impact on surfactants division. Revenues in detergent division are limited due to huge outlays on sales promotion and distribution for retail sale. Interim Performance During Q2FY16, revenue increased by 25.5% on YoY basis from INR438.0m in Q2FY15 to INR549.5m. On operational front, operating profit of the company increased by 21.3% YoY from INR79.2m in Q2FY15 to INR96.1m in Q2FY16. Net profit of the company increased by 57.4% YoY from INR45.3m in Q2FY15 to INR71.3m in Q2FY16. 2
Table 3: Summary of year to date performance (Consolidated) (INRm) Q2 FY16 Q2FY15 YoY % Q1FY16 QoQ% H1FY16 H1FY15 YoY % Revenue 549.5 438.0 25.5 509.2 7.9 1,058.7 858.3 23.3 EBITDA 96.1 79.2 21.3 80.5 19.4 176.6 151.3 16.7 EBITDA Margin (%) 17.5 18.1 0.6 15.8 1.7 16.7 17.6 0.9 PAT 71.3 45.3 57.4 52.2 36.6 123.5 95.7 29.0 Competition analysis Table 4: Peer comparison CMP (INR) Mcap (INRm) Rev (INRm) NPM (%) EPS(INR) PE(x) Ultramarine & Pigments Ltd 112.9 3,296.7 1,722.1.9 6.4 17.6 Pidilite Industries Ltd 557.2 285,655.7 43,980.7 11.4 9.8 56.9 Cochin Minerals & Rutile Ltd 75.9 598.9 1,172.6 18.3 27.3 2.8 Chembond Chemicals Ltd 409.8 2,736.0 2,0.4 2.5 8.4 49.0 Source: BSE Financial snapshot Chart 1: Sales trend Chart 2: Margin trend 2,000 1,500 1,000 500 Sales (INRm) Sales (% YoY, RHS) 15 5 350 300 250 0 150 0 50 EBITDA (INRm) EBITDA mgn (%, RHS) 17.5 17.0 16.5 16.0 15.5 15.0 14.5 14.0 13.5 Chart 3: EPS trend Chart4: Working Capital Profile EPS (INR) EPS Growth(% YoY, RHS) Debtors TO Stock TO Creditors TO 7.0 6.0 5.0 4.0 3.0 2.0 1.0 40 30 () () 70 60 50 40 30 3
Financial Summary (Consolidated) Profit and loss (INR m) Balance sheet (INR m) Year ending 31 March FY13 FY14 FY15 Year ending 31 March FY13 FY14 FY15 Revenue 1,398.9 1,502.2 1,722.1 Net Block 429.6 421.5 396.9 Direct Expense 588.3 603.9 727.0 Investments 132.2 132.2 132.2 Staff Cost 252.8 278.6 316.8 Cash and Banks Balance 112.1 126.6 164.0 Other Expenditure 348.8 368.7 384.0 Inventory 116.4 181.9 4.2 Total Cost 1,189.9 1,251.2 1,427.8 Sundry Debtors 238.7 219.3 219.4 EBITDA 9.0 251.0 294.3 Loans and Advances 155.9 186.4 261.4 EBITDA margin (%) 14.9 16.7 17.1 Other Current Assets 5.5 3.9 6.9 Depreciation 57.6 56.1 31.5 Other 0.0 0.0 0.0 EBIT 151.3 194.9 262.8 Total Assets 1,190.3 1,271.8 1,384.9 Interest Expenses 15.6 9.6 4.9 Gross Debt 23.1 0.0 0.0 Nonoperating Income 38.0 30.6 17.3 Trade Payables 36.7 74.8 1.3 PBT 173.7 215.9 275.1 Provisions & other curr 213.7 225.3 222.2 lia Provision for Tax 52.4 71.9 87.7 Others 53.7 49.9 57.6 PAT 121.2 144.0 187.4 Equity Capital 58.4 58.4 58.4 Growth % 11.5 18.7 30.2 Reserves & Surplus 804.8 863.3 936.4 PAT margin (%) 8.7 9.6.9 Share Application money 0.0 0.0 0.0 Minority Interest 0.0 0.0 0.0 Minority Interest 0.0 0.0 0.0 Extra Ordinary 0.0 0.0 0.0 Shareholders' funds 863.2 921.7 994.8 PAT (Reported) 121.2 144.0 187.4 Total Liabilities 1,190.3 1,271.8 1,384.9 Cash Flow Metrics Ratios, growth and per share analysis FY13 FY14 FY15 YoY % change FY13 FY14 FY15 Net Profit before tax 173.7 215.9 275.1 Revenue 2.8 7.4 14.6 Operating Cash Flow 139.5 169.5 232.6 EBITDA.2.1 17.2 Investing Cash Flow 13.3 18.5 84.3 Recurring EPS 11.5 18.7 30.2 Financing Cash Flow 152.2 9.5 1.3 Ratios (%) Net Change in Cash 0.7 78.5 38.0 ROE 14.4 16.1 19.6 Op.cash and Equivalent 43.9 44.6 123.0 ROCE 15.5 17.0.1 Cl.cash and Equivalent 44.6 123.0 161.0 EBITDA Margin 14.9 16.7 17.1 Ratio Du Pont Analysis Net Debt/Equity (x) 25.6 28.1 29.8 FY13 FY14 FY15 Net Debt/ EBITDA (x) 1.1 1.0 1.0 Net Profit Margins (%) 8.7 9.6.9 Inventory days 35.9 36.2 40.9 Total Assets Turnover 1.5 1.6 1.7 Debtors days 57.9 55.6 46.5 Leverage Multiplier 1.1 1.1 1.1 Payables day 16.3 13.6 19.6 ROAE (%) 14.4 16.1 19.6 Total Asset TO ratio 1.5 1.6 1.7 Valuation Fixed Asset TO Ratio 3.2 3.5 4.2 FY13 FY14 FY15 Per share data (INR) EV/Sales 2.2 2.0 1.7 EPS reported (diluted) 4.2 4.9 6.4 EV/EBITDA 14.7 12.1.2 Recurring EPS (diluted) 4.2 4.9 6.4 P/E (x) 27.2 22.9 17.6 DPS 2.3 2.5 3.0 P/B(x) 3.8 3.6 3.3 Book Value(basic) 29.6 31.6 34.1 Dividend yield (%) 2.0 2.2 2.7 Wtd avg ord shares (m) 29.2 29.2 29.2 FCF yield (%) 31.4 27.1 14.6 Wtd avg dil shares (m) 29.2 29.2 29.2 Source: BSE, Company, Varhad research 4
DISCLAIMER Varhad Financial Consultancy Services Private Limited (Varhad FCS), an entity of the Varhad Group has taken utmost care to ensure accuracy and objectivity while writing this report based on publicly available information or from reliable sources. However, neither the accuracy nor completeness of information contained in this report is guaranteed. Opinions expressed herein are our current opinions as on the date of this report. Nothing in this report can be construed as either investment or any other advice or any solicitation, whatsoever. The subscriber/user assumes the entire risk of any use made of this report or data herein. Varhad FCS specifically states that it or any of its entities or employees do not have any financial liabilities whatsoever to the subscribers / users of this report. This report is for personal information only of the authorised recipient in India only. This report or part of it should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person or published or copied for any purpose. PUBLISHED BY Varhad Financial Consultancy Services (VFCS) is the research and financial consultancy services entity of the Varhad Group. We have one of the best inhouse research team, which has sound understanding of SMEs through clients across India. We provide project specific, company specific and sector specific consultancy services. We help companies expand businesses through network expansion. We also help in balance sheet strengthening and improvement in both credit and business profile of the company. Regd. Office: Flat No. 1, Harsh Apartment, Near Gore Apartment No. 2, Shastri Nagar, Behind Akashwani, Akola 444001 Head Office: 441, Samruddhi, Sector 25, PCNDTA, Nigdi, Pune 4144 Tel: +9165293366 www.varhadcapital.com SEBI Certificate of Registration as Research Analyst Registration No: INH000000446 Dated: 25 May 15 5