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World’s two largest IBB manufacturing Companies

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Vinati Organics Ltd.

BSE / NSE Code: 524200/ VINATIORGA | Face Value: Rs 2 | CMP: Rs1900 |
52Weeks H/L (Rs): 1,952.35 – 909.05 | Marketcap: Rs9999 crore |
Promoters holding: 74.01% | Institutional holding: 13.68% | Public holding: 12.31%

Vinati Organics Limited (VOL) is a speciality chemical company that focuses on manufacturing of speciality chemicals and organic intermediaries. It is among the few companies that have been able to deal with the cost advantage of Chinese counterparts over the past few years. Advanced technology, economies of scale, and environmental friendly processes, have helped the Company to be a key manufacturer in speciality chemicals space that is used in various products. The Company is very strong in terms of process innovation, where it has established a process which is greener as well as cheaper. The Company is also good with backward and forward integration and has successfully adopted a technique which helps it to reduce operating costs. Over the years, the Company has developed a unique place for itself within the speciality chemical industry.

The Company has equity of Rs10.28 crore while it has huge reserve of around Rs1041 crore. Promoters hold 74.01%, FIIs hold 3.63% and DIIs hold 6.34% stake in this company.

For Q4FY19, the Company posted 58.98% higher PAT of Rs82.53 crore on 39.51% higher sales of Rs296.61 crore and an EPS of Rs16.06. During FY19, its PAT zoomed 96.33% to Rs282.49 crore from Rs143.88 crore in FY18 on 49.30% higher sales of Rs1108.14 crore fetching an EPS of Rs54.97. Stock is trading at P/E ratio of 35x and looking attractive for long term investment horizon.

A Performance IE&M Research Team is proud of

This is one of the many success stories the IE&M Research Team has created in the last three years. In the issue published in May 2018 the Team had recommended this stock when it was trading below Rs100 level. When generally many stocks disappointed investors this stock doubled in the same period. Further analysis taking into consideration the just announced financial result we still feel enough steam is left at this counter even at this price for long term investment.

IOL Chemicals & Pharmaceuticals Ltd.

BSE / NSE Code: 524164/ IOLCP | Face Value: Rs10 | CMP: Rs210 |
52Weeks H/L (Rs): 227.50 – 78.20 | Marketcap: Rs1269 crore |
Promoters holding: 41.89% | Institutional holding: 33.82% | Public holding: 24.29%

IOLCP is India’s one of the leading pharmaceutical company and is a major manufacturer in the speciality organic chemical space. It is one of the largest producers of Ethyl Acetate (87,000 TPA) and ISO Butyl Benzene (IBB) India with over 30% of the global market share and a major player in Ibuprofen. It has forward-integrated this vertical to the pharmaceutical segment with end products such as Ethyl Acetate, IBB, MCA and Acetyl Chloride used as key raw materials for Ibuprofen. It plans to explore its presence in other industries such as paints, flexible packaging and glass. In line with this approach, it has added many MNC giants to its customer base.

With a presence in more than 50 countries, IOLCP has established itself as a major player in Ibuprofen with 30%+ of the global capacity. It is the world’s only backward-integrated Ibuprofen producer (12,000 TPA) that manufactures all intermediates and key starting materials at one location. It has augmented its pharma business by moving up the value-chain with entry into lifestyle drugs for pain management, anti-depressant, anti-diabetic, anti-platelet and anti-convulsion. IOLCP’s Ibuprofen plant is USFDA and EUGMP certified and contributes 85% to the total revenue of its Pharma division. IOLCP is diversifying its API products portfolio. Besides its multipurpose plant, it has a 17 MW power generation plant for captive consumption.

The Company has equity of Rs56.88 crore with huge reserve of around Rs417.45 crore. FIIs hold 1.76% stake in this company. For Q4FY19, IOLCP’s net profit zoomed 784.69% to Rs101.65 crore on 46.87% higher sales of Rs422.29 crore fetching an EPS of Rs18.08. During FY19, its net profit soared 754.51% to Rs236.70 crore on 68.37% higher sales of Rs1685.33 crore fetching an EPS of Rs42.11.

Currently, the stock trades at a P/E of just 5.1x. The Company has allotted 25,00,000 convertible warrants on preferential basis to promoters at Rs205 per share and they have already converted 6,82,000 warrants into shares in March quarter. The company has enhanced existing manufacturing facilities of Ibuprofen from 10000 MT per annum to 12000 MT per annum and Iso Butyl Benzene from 9000 MT per annum to 12000 MT per annum in May 2019 at aggregate capex of Rs12.10 crore which is met from internal accruals.

The company has pre-paid Rs47.62 crore to the banks in addition to regular repayments, to reduce the debt. Stock looks attractive for long term investment.

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