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Transpek Industry (TI)

NSE TRANSPEK BSE 506687
CMP 1574 Date 11-Sep-18

OVERVIEW
Transpek Industry Ltd (referred here as TI) is a chemical company specializing in Chloride and
Sulphur chemicals. Company makes products that are used in the manufacturing of Polymers
and Specialty Plastics and supplies to global manufacturers.

The company has 4 main divisions of operations:

- Polymers and Specialty Plastics and Performance Materials
- Pharma Products
- Agrochemicals
- Flavours And Fragrances

PRODUCTS
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NEW DEVELOPMENT
Dupont US outsourcing supply of key chemicals to Transpek.
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The company announced a capacity expansion program from 31,000MT to 66,000MT. The total
cost is planned at 90 cr and is expected to be generated from internal accruals.

The expected average gross margins are around 30% and net margins in the 8-12% region. In
the first three years, the sales is expected to total revenues of around Rs. 700 cr.

Transpek Industry Limited was set up in the year 1965 for manufacturing of transparent acrylic
sheet, from where it was christened as ‘Transpek’. The company has diversified and emerged as
a producer and exporter of chemicals.

With its expertise in handling Chlorine and Sulphur, Transpek has indigenously developed
process for chlorinated chemicals like Thionyl Chloride and various Acid and Alkyl Chlorides.
Currently TI carries out reactions like Chlorination (Inorganic Chemicals), Acid Chlorination with
Thionyl Chloride (Acid Chlorides & Fatty Acid Chlorides), Alcohol Chlorination with Thionyl
Chloride (Alkyl Chlorides), Friedel-Crafts Reactions, Sulfonation and Amidation.

Through Chlorination, the Company manufactures many Acid Chlorides and Alkyl Chlorides
besides the key raw material Thionyl Chloride. Acid Chlorides and Alkyl Chlorides form basic
building blocks for a very broad range of products and are being used in very large quantities by
many chemical manufacturers including global giants.

MANAGEMENT
Ashwin C. Shroff is the Chairman of Excel Industries Limited. He started his career in 1965 as a young
trainee and has grown to spearhead Excel Industries Limited. He was the Chairman of Excel Industries
Limited and Excel Crop Care Limited before it was sold.

The promoter holding has gone up from 55% to 59% in FY18. Compensation for the MD for FY18 was
2.95cr which is not excessive.

The company has a decent record

DIVIDEND PAYOUT of dividend payout. It missed
32.26%

paying a dividend in 2012, when it

made losses.
26.55%

20.70%
20.39%

19.04%
18.38%
17.70%

17.22%

16.77%
0.00%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
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THE BUSINESS
Debt is also reasonable for a capex heavy business such as chemicals.

DEBT / EQUITY

1.41

1.27
1.17

1.04
1.01
0.98

0.96

0.82
0.70

0.43
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Company continues to maintain average operating margins of 12-13%. New capacity coming in
at 8-12% net margins may slightly boost the margin profile.

MARGINS
OPM NPM
16.6%
16.5%
16.2%

14.3%
13.4%

13.2%

12.1%

12.0%
9.6%

9.5%
7.5%

7.2%
6.9%

4.9%
4.7%

4.3%
4.0%

3.0%
0.1%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
-6.6%
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RoE has reduced due

DUPONT ANALYSIS to decreased asset
4.00 30% turnover ratio, which
20% in turn has reduced
3.00
due to capacity
10%
2.00 addition – Net Block
0%
has increased 117cr
1.00
-10% to 178cr in FY18.
0.00 -20%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
-1.00 -30%

Net margin Asset turnover ratio Financial leverage RoE

Sales and Profits have

SALES been growing at a
400.00 reasonable pace over
350.00 the years.
300.00
250.00
200.00
150.00
100.00
50.00
-
Sales

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

PROFIT
Profit before tax Net profit EPS
53.67

47.26
42.41
36.24

35.03
31.68

29.98

26.40
21.76

21.28
18.84
17.42
17.08

15.76
14.12

12.78
12.44

12.26
11.88

11.06
10.99
10.23
7.90

7.75

7.20
6.07
4.55

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
-10.32
-12.49
-17.57
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The PE for the stock

has seen a near 3x
jump in the last 1
53.67
47.26 year. FY19 EPS is
expected between 70-
36.24
29.27 75.
21.76
17.42 18.84
14.12 12.26 13.66 11.57
8.89 11.26 11.00
7.75 6.82
3.57 3.88
-4.65
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
-17.57

EPS Price to earning

RISKS
1. Raw materials are crude linked, hence major changes in crude price will reflect in revenues
2. Company has forex exposure due to its exporting nature of the business.
3. Being in the chemical sector, environmental pollution and toxicity related hazards are present.
4. Unavailability of any key raw material or intermediary can impact production.
5. The company’s factory is in a single location. Any geographical incident can severely impact the
business.

Chart – 3 years