SUHANI ADILABADKAR RESEARCH REPORT
HIMADRI SPECIALITY CHEMICAL LTD
HIMADRI SPECIALTY CHEMICAL LTD V/S S&P BSE SENSEX
Q3 FY18
CMP Rs. 147.45
TARGET Rs. 265.00
QUARTERLY OUTLOOK & RECOMMENDATION
Himadri Speciality Chemical Ltd, largest coal tar pitch
manufacturer, reported spectacular third quarter numbers on the
back of strong revenue growth and high operational efficiency.
Revenue or Income From Operations rose 28% YOY and stood at
Rs. 5001 Mn compared to Rs. 3913 Mn in the corresponding
December quarter previous year. EBDITA almost doubled and
was reported at Rs. 1222 Mn compared to Rs. 627 Mn on yearly
basis. Profit After Tax multiplied 4 times YOY from Rs. 201 Mn to
Rs. 701 Mn in the December quarter FY18. Sequential growth was
also strong and stable for Revenue, EBDITA & PAT at 7%, 17% &
37% respectively. Operating Expenditure jumped 17% YOY from
Rs. 3237 Mn to Rs. 3796 Mn in the Q3 FY18. On sequential basis,
operating expenditure grew 4%. As a result EBDITA margin
jumped phenomenally by 663 basis points YOY and 210 basis
points sequentially. One basis point is 0.01%. Net Profit Margin
followed suit rising 889 basis points YOY and 309 basis points on
quarterly basis. Depreciation expenditure is stable at around Rs.
79 Mn and interest expenditure has declined considerably over
the past 4 quarters. Interest/Finance costs halved from Rs. 242 Mn
to Rs. 121 Mn in Q3 FY18. Taxation jumped 3 times YOY from Rs.
106 Mn to Rs. 351 Mn in Q3 FY18. Himadari Chemicals has
maintained its profitability momentum through higher revenue
growth and controlled operating cost structure. The company has
also rationalized its debt and repaid about Rs. 400 Mn over the
previous 4 years. Himadari Specialty Chemical will be investing
Rs 1000 crore to expand its Carbon Black business. The company
will be setting up new carbon black lines in its existing integrated
plant in Mahistikry, West Bengal for producing Specialty Carbon
Black.
Himadari Speciality Chemical Ltd, is the largest coal tar pitch
manufacturer in India. The company is a carbon specialist
developing coal tar by-products and addressing needs of growing
industries such as aluminium, graphite, infrastructure, lithium ion
batteries and Tyre. About 98% of its revenues come from carbon
material & chemicals segment which have risen 28% YOY. Carbon
revenues stood at Rs. 4957 Mn against Rs. 3871 Mn corresponding
period previous year. The other segment, Power contributed just
2% in the Decmber quarter and was reported at Rs. 90 Mn. Strong
capex plans, specialized core product profile and high growth
opportunities in sunrise industry such as lithium-ion battery will
lead to strong and sustainable growth for the company in the long
run. With 17% market share, Himadri Speciality Chemical Ltd is
the 3rd largest player in the field of Carbon Black in the country.
We recommend BUY for the medium & long term with target price
of Rs. 265. We recommend BUY for the stock for medium & long
term investment with PE multiple of 25.70 x FY18E & 20.21 x FY19E
at CMP of Rs.147.45.
INDUSTRY SPECIALTY CHEMICALS
SCRIP CODE 500184
FACE VALUE 1.00
MARKET CAP Rs. 61693 Mn
52 WEEK
HIGH/LOW Rs. 197.00 /Rs.47.50
SHAREHOLDING PATTERN (%)
PROMOTER 48.95
PUBLIC 51.05
OTHERS -
TOTAL 100.00
In Mn Q3 FY18 Q3 FY17 CHN%
REVENUE 5000.80 3913.20 28%
PAT 701.40 201.10 249%
EBDITA 1222.10 626.80 95%
EPS 1.68 0.48 249%
In Mn FY17A FY18E FY19E
REVENUE 14712.50 19861.88 21848.06
PAT 811.80 2400.11 3053.35
EBDITA 2548.80 4638.29 5408.19
EPS 1.94 5.74 7.30
PE 76.00 25.70 20.21
BUY
PERFORMANCE METRICS (December Quarter FY18)
Profitability Analysis
Himadri Specialty Chemical Ltd reported strong
yearly numbers in December quarter FY18 as
Revenue, PAT & EBDITA all grew in double digits.
Revenue grew 28% YOY from Rs. 3913 Mn to Rs. 5001
Mn in the current December quarter with sequential
growth of 7%. Net Profit Tax jumped 3 times YOY and
37% QOQ at Rs. 701 Mn against Rs. 201 Mn
corresponding quarter previous year on the back of
controlled operating expenditure and higher
revenues growth. Earnings Before Depreciation,
Interest, Tax & Amortization (EBDITA) almost doubled
YOY and stood at Rs. 1222 Mn against Rs. 697 Mn same
period previous year. Operating cost has jumped 17%
YOY with raw material cost rising 1.5 times YOY in the
December quarter FY18. Other Income was reported
at Rs. 17 Mn against Rs. 20 Mn corresponding quarter
previous year. On quarterly terms, other income
declined 9% and stood at Rs. 19 Mn in the previous
September quarter FY18. Himadri Specialty Chemical
Ltd will be setting up new carbon black lines in its
existing integrated plant in Mahistikry, West Bengal for
producing Specialty Carbon Black.
201
304
500 512
701
Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18 Q3 FY18
NET PROFIT GROWTH
Rs. In Mn
697
744
1016
1045
1222
Q3 FY17
Q4 FY17
Q1 FY18
Q2 FY18
Q3 FY18
EBDITA
Rs. In Mn
Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18 Q3 FY18
3913 4153
5027 4680 5001
REVENUE GROWTH
Rs. In Mn
Expenditure Analysis
Cost of Material accounts for the largest chunk i.e 85% of total operating expenditure. Cost of Material rose 48% YOY
and stood at Rs. 3390 Mn whereas quarterly rise was j ust 2%. Employee Benefit Expenses grew 28% YOY at Rs. 115
Mn against Rs. 90 Mn same period previous year. Employee Benefit Expenses constituted 3% of total operating
expenditure and were constant on sequentially. Other Expenses stood at Rs. 410 Mn in Q3 FY18, almost stagnant YOY
with a quarterly rise of 5.50% in the December quarter FY18.
20.40
19.70
11.80
18.80
17.20
Q3
FY17
Q4
FY17
Q1
FY18
Q2
FY18
Q3
FY18
OTHER INCOME
Rs. In Mn
5.14%
7.32%
9.95%
10.93%
15.62%
Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18 Q3 FY18
NET PROFIT MARGIN
Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18 Q3 FY18
2288 2454
3083
3331 3390
COST OF MATERIAL
Rs. In Mn
Rs. In Mn Q3 FY18 Q3 FY17 CHG%
Cost Of
Materials 3390.00 2287.90 48%
Employee
Benefit
Expenses
115.10 90.00 28%
Other
expenses 410.20 404.20 1%
Excise Duty 0.00 395.60 -100%
Depreciation
&
Amortization
79.10 77.00 3%
EBDITA margin for the current quarter stood at 24.44%
compared to 17.81% same period previous year rising
663 basis points. QOQ, EBDITA margin grew
phenomenally by 210 basis points as margin was
reported at 22.34% in Q2 FY18. Revenue growth
outpaced rise in operating expenditure both yearly
and sequentially leading to healthy operating
margins. Operating expenditure increased 17% YOY
and 4% QOQ. Depreciation constituting 2% of the total
revenue was constant around Rs. 79 Mn sequentially
and jumped 3% YOY. Taxation expenditure accounted
5% of total revenue in Q3 FY18. On yearly basis,
taxation has jumped 3 times and in absolute value
about Rs. 164 Mn in the current Q3 FY18. On quarterly
basis Taxation expenditure rose 10% or Rs. 25 Mn in
absolute terms. Total expenditure including interest
cost and taxation constituted 87% of the total revenue
in the December quarter FY18 against 94% same
period previous year declining 19% YOY.
Q3
FY17
Q4
FY17
Q1
FY18
Q2
FY18
Q3
FY18
77.00
77.30
78.90 78.90 79.10
DEPRECIATION
Rs. In Mn
242.40
138.30
185.90 208.10
121.10
Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18 Q3 FY18
INTEREST EXPENSE
Rs. In Mn
106
153
245 246
351
Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18 Q3 FY18
TAXATION EXPENSE
Rs. In Mn
Segment Revenue Analysis
CARBON MATERIALS & PRODUCTS
Coal Tar Distillation
Coal tar is a by-product generated while processing coking coal into low ash metallurgical coke in a recovery-type
coke oven plant. Coal tar accounts for around 3.5-4% of coke produced. Coal tar pitch is a complex chemical with 22
chemical and physical properties obtained through coal tar distillation, which involves the conversion of coal tar into
a variety of intermediate chemical products. The residue is coal tar pitch, which is further processed into quality coal
tar pitch of desired chemical and physical properties. Himadri Speciality Chemical Ltd caters to more than two-third
of demand for Indian Graphite and Aluminium Industries. The company is supplier of upto 95% of Coal Tar Pitch
requirements of certain Smelters.
Carbon Black
Carbon black is defined as elemental carbon with tarbostatic structure, derived from the incomplete pyrolisis of
fossil oil. Carbon black is produced through the controlled incomplete combustion of hydrocarbons. Carbon black is
actually elemental carbon in the form of fine particles with an amorphous molecular structure. The company is third
largest carbon black producer in India with 120,000 MTPA. The company caters to niche applications in Tyre & Non-
tyre industry and Speciality such as Plastic Masterbatch, Fibre, Wire & Cable, Pipes, Engineering, Plastics, Flims,
Inks, Coatings, etc.
Advanced Carbon Material
At Himadri Speciality Chemical, anode material is manufactured from coal tar using in-house technology. The
manufacturing process involves coal tar treatment into specialised pitch, carbonisation, graphitisation and powder
processing. All these process upto quality control are conducted in our in-house facility. The products are in the form
of Standard synthetic graphite, high power graphite and carbonised pitch. The applications of these products are in
Li-ion batteries to power mobile devices, computers, automobiles, tools, EV and HEV.
Carbon
Materials
&
chemicals
98%
Power
2%
REVENUE MIX
Rs. In Mn Q3 FY18 Q3 FY17 CHG%
Carbon Materials & chemicals
4957 3871 28%
Power 90 85 6%
Corrosion protection
Himadri produces coal tar-based corrosion protection products using its own technology for use in the corrosion
protection of underground and off-shore pipelines. Major products are Himcoat, Himtape, Himwrap and are used in
oil and pipe gas pipelines, water and sewage pipelines, tanks, underground structure and fittings.
Naphthalene Sulphonate
Sulfonated naphthalene formaldehyde condensate sodium salt is produced in liquid and powdered form. It improves
concrete mix by dispersing cement particles for extended workability and also improves the compressive flexural
strength. It is also used as a dispersing agent in dyes, leather and agro industries. The company has emerged as the
largest Indian manufacturer of SNF with an installed capacity of 68,000 tonnes per annum.
POWER
Himadri Speciality Chemicals successfully commissioned its captive power plant running on carbon black off-gas
and connected to the grid. The entire power is marketed under the IPP model. Power plant of 15 MW is being set up
with green and clean energy.
Corporate Profile
Himadri Speciality Chemical Ltd established in 1990, is the largest vertically integrated speciality carbon company
and the largest producer of coal tar pitch in India with headquarters in Kolkata, West Bengal. The Company is a
leader in products like Coal Tar Pitch with market share of around 70% catering to more than two-thirds of the Indian
Graphite and Aluminium industry, Carbon Black with market share of 17% catering to niche application in Tyre and
non-Tyre industry. In the last few years, Himadri Speciality has diversified its product portfolio by way of forward
integration which includes advance carbon material and other value added speciality products. The Company has
eight manufacturing capacities spread across India in West Bengal, Andhra Pradesh, Chhattisgarh, Gujarat and
Odisha. The Company is focused on maintaining consistent leadership in the core products and developing market
for the value-added product. The Company has developed a strong and experienced R&D team with international
experts; its R&D unit is situated at Mahistikry, West Bengal which is recognized by Government of India.
Financial Analysis
QUARTERLY PROFIT & LOSS STATEMENT OF HIMADRI SPECIALITY CHEMICAL LTD FROM 30th June 2017 TO 31st March 2018E
VALUE 30-June-17 30-Sep-17 31- Dec-17 31-March-18E
Rs. In Million 3 months 3 months 3 months 3 months
INCOME FROM OPERATIONS 5026.70 4680.20 5000.80 5250.84
OTHER INCOME 11.80 18.80 17.20 18.92
TOTAL INCOME 5038.50 4699.00 5018.00 5269.76
EXPENDITURE -4022.90 -3653.60 -3795.90 -3947.74
EBDITA 1015.60 1045.40 1222.10 1322.02
DEPRECIATION -78.90 -78.90 -79.10 -80.68
PROFIT BEFORE INTEREST & TAX 936.70 966.50 1143.00 1241.34
INTEREST -185.90 -208.10 -121.10 -108.99
FOREIGN EXCHANGE FLUCTUATION -5.50 -0.70 30.00 0.00
PROFIT BEFORE TAX 745.30 757.70 1051.90 1132.35
TAX -245.00 -246.10 -350.50 -403.08
PROFIT AFTER TAX 500.30 511.60 701.40 729.28
EQUITY CAPITAL 418.40 418.40 418.40 418.40
FACE VALUE 1.00 1.00 1.00 1.00
EPS 1.20 1.22 1.68 1.74
ANNUAL PROFIT & LOSS STATEMENT OF HIMADRI SPECIALITY CHEMICAL LTD FROM 2016 TO 2020E
VALUE 31- Mar-16 31- Mar-17 31- Mar-18E 31-Mar-19E 31-Mar-20E
Rs. In Million 12 months 12 months 12 months 12 months 12 months
INCOME FROM OPERATIONS 12907.80 14712.50 19861.88 21848.06 24469.83
OTHER INCOME -1.50 79.00 79.79 87.77 96.55
TOTAL INCOME 12906.30 14791.50 19941.67 21935.83 24566.38
EXPENDITURE -11378.10 -12242.70 -15303.38 -16527.65 -18180.41
EBDITA 1528.20 2548.80 4638.29 5408.19 6385.97
DEPRECIATION -637.10 -309.70 -325.19 -344.70 -372.27
PROFIT BEFORE INTEREST & TAX 891.10 2239.10 4313.11 5063.49 6013.69
INTEREST -1099.90 -804.70 -627.67 -596.28 -584.36
FOREIGN EXCHANGE FLUCTUATION 0.00 -200.30 23.80 0.00 0.00
PROFIT BEFORE TAX -208.80 1234.10 3709.24 4467.21 5429.34
TAX 45.20 -422.30 -1309.13 -1413.86 -1594.83
PROFIT AFTER TAX -163.60 811.80 2400.11 3053.35 3834.50
EQUITY CAPITAL 418.40 418.40 418.40 418.40 418.40
RESERVES 8791.00 10362.60 12762.71 15816.06 18821.11
FACE VALUE 1.00 1.00 1.00 1.00 1.00
EPS -0.39 1.94 5.74 7.30 9.16
BALANCE SHEET OF HIMADRI SPECIALITY CHEMICAL LTD FROM 2016-2020E
CAPITAL & LIABILITIES (Rs. In Mn) 2016 2017 2018E 2019E 2020E
CAPITAL 418.40 418.40 418.40 418.40 418.40
RESERVES & SURPLUS 8791.00 10362.60 12762.71 15816.06 18821.11
NETWORTH 9209.4 10781.00 13181.11 16234.46 19239.51
NON CURRENT LIABILITIES
Borrowings 3660.00 3870.30 4063.82 4185.73 4269.44
Derivatives 594.30 88.20 74.97 67.47 62.08
Other Financial Liabilities 2.60 2.60 2.73 2.93 3.20
Provisions 10.30 17.90 18.80 20.11 22.12
Deferred Tax Liabilities 475.80 897.40 1974.28 2467.85 2961.42
TOTAL NON CURRENT LIABILITIES 4743.00 4876.40 6134.59 6744.09 7318.26
CURRENT LIABILTIES
Borrowings 3920.60 3386.90 4301.36 5161.64 6039.11
Trade Payables 885.40 1493.10 1582.69 1709.30 1863.14
Derivatives 24.50 459.40 25.02 26.27 28.37
Other Financial Liabilities 1310.90 396.70 801.33 961.60 1125.08
Other Current Liabilities 239.80 347.70 278.16 292.07 306.67
Provisions 6.60 1.80 0.00 0.00 0.00
TOTAL CURRENT LIABILITIES 6387.80 6085.60 6988.56 8150.88 9362.37
TOTAL EQUITY & LIABILITIES 20340.20 21743.00 26304.26 31129.43 35920.14
ASSETS (Rs. In Mn)
NON CURRENT ASSETS
Property, Plant & Equipment 11008.40 11029.70 11360.59 12042.23 13005.60
Capital Work In Progress 273.30 93.60 252.72 265.36 273.32
Investments 1116.80 1665.80 3664.76 5712.33 7456.65
Trade Receivables 78.80 79.90 87.89 101.07 136.45
Loans 227.20 250.00 472.50 529.20 576.83
Other Financial Assets 0.20 0.70 0.00 0.00 0.00
Deferred Tax Assets 0.00 785.30 1217.22 1521.52 1764.96
Non Current Tax Assets 41.00 41.00 41.00 41.00 41.00
Other Non Current Assets 842.10 271.60 293.33 322.66 345.25
TOTAL NON CURRENT ASSETS 13587.80 14217.60 17390.00 20537.29 23601.98
Inventories 3150.10 3920.70 5096.32 6370.40 7644.48
Investments 210.00 2.50 1.50 1.65 1.90
Trade Receivables 1998.70 2156.10 2250.64 2374.42 2493.14
Cash & Cash Equivalents 182.00 113.30 59.99 65.99 75.89
Bank Balances 169.30 246.60 236.84 260.53 299.60
Loans 13.10 41.90 36.17 39.78 44.57
Other Financial Assets 108.20 106.20 153.99 184.79 230.99
Other Current Assets 921.00 938.10 1078.82 1294.58 1527.60
TOTAL CURRENT ASSETS 6752.40 7525.40 8914.26 10592.15 12318.17
TOTAL ASSETS 20340.20 21743.00 26304.26 31129.43 35920.14
Ratio Analysis
Year FY 16A FY 17A FY 18E FY19E FY20E
EPS -0.39 1.94 5.74 7.30 9.16
NPM - 5.52% 12.08% 13.98% 15.67%
EBDITA MAGIN 11.84% 17.32% 23.35% 24.75% 26.10%
ROE - 7.53% 18.21% 18.81% 19.93%
DEBT EQUITY 0.82 0.67 0.63 0.58 0.54
EV/EBDITA 43.04 25.37 13.94 13.08 10.22
BOOK VALUE 23.88 25.77 31.50 38.80 45.98
P/BV 6.18 5.72 4.68 3.80 3.21
PE - 76.00 25.70 20.21 16.09
Comparative Analysis
Standalone
Q3 FY18 EPS
(Rs)
REVENUE
(Rs. In Mn)
PAT
(Rs. In Mn)
EBDITA
(Rs. In Mn)
MKT CAP
(Rs. In Mn)
Himadri Specialty
Chemicals Ltd 1.68 5000.80 701.40 1222.10 61693.08
Bhageria Industries Ltd 2.56 3040.71 305.40 548.14 17075.90
Meghmani Organics Ltd 0.67 3073.06 171.35 481.32 23918.30
SUHANI ADILABADKAR
9701063320
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