Académique Documents
Professionnel Documents
Culture Documents
Exhibit 2: Vinati will treble its gross Exhibit 3: Aarti too will double its gross Exhibit 4: amlin Finesciences too will
block over the next 5 years (Rs mn) block over the next 5 years (Rs mn) treble gross block in the next 5 years
(Rs mn)
15,978 48,169
14,978 44,529 9,849
13,978 41,029
12,978 8,722
36,029 7,794
9,978 31,029 7,033
26,529
20,814 4,972
5,978 16,851 3,5973,952
4,123 4,851 2,951
FY15
FY16
FY17
FY18E
FY19E
FY20E
FY21E
FY22E
FY18E
FY19E
FY20E
FY21E
FY22E
FY15
FY16
FY17
FY15
FY16
FY17
FY18E
FY19E
FY20E
FY21E
FY22E
Source: Company, Ambit Capital Source: Company, Ambit Capital Source: Company, Ambit Capital
Ajay.Rao@ambit.co
Ambit Capital Pvt Ltd 16 January 2018
AMBIT INSIGHTS
Opportunities in India
Most chemicals are used as intermediates for final goods. Growth in consumption
of chemicals can easily cross 1.5x GDP growth (source: Avalon Consulting) over
the next few years. As consumption of final products increases, the chemicals
sector will also post strong growth. India is short of chemicals capacities and
hence has to import a lot.
Many MNCs present in China are considering shifting their manufacturing base to
India or are considering setting up new capacities (expansion projects) In India.
Many global chemical companies (especially Japanese, European and Korean) are
at various stages of setting up business in India as PE investors, through buyouts
or by setting up greenfield capacities. The local Indian companies will also have
ample opportunity to grow in their niches/segments.
Most chemical companies were established in India in late 1970s or 1980s. The
second generation is (i) more educated; (ii) has global exposure; (iii) is ready to
engage with professionals; (iv) has right attitude and technical skills; and (v) is
willing to invest in capacities and R&D. Many such companies are ready to expand
operations or are in the process of launching new products (like Aarti Industries).
In many cases, the second generation is not interested in continuing with the
business. These companies represent good targets for PE players.
The Indian government is open to supporting the industry with anti-dumping
duties. In cases where India has executed FTA, the government is also open to
imposing non-tariff barriers like restrictions in quantum of imports and packaging.
In India too many companies are increasingly under pressure to comply with
green regulations. For e.g. many companies in MIDC (Maharashtra Industrial
Development Corporation) have been forced to shut down. India is also setting up
big industrial parks for chemical companies with all facilities needed for efficient
running of chemicals units.
Exhibit 5: Recent rupee appreciation headwinds are waning; rupee may depreciate on
the back of rising government spends ahead of elections and expensive crude imports
10.4
10.2
10
9.8
9.6
9.4
9.2
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Sep-15
Nov-15
Jan-16
Mar-16
May-16
Jul-16
Sep-16
Nov-16
Jan-17
Mar-17
May-17
Jul-17
Sep-17
Nov-17
Ajay.Rao@ambit.co
Ambit Capital Pvt Ltd 16 January 2018
AMBIT INSIGHTS
Exhibit 7: Relative benchmarking – we continue to focus on top-tier companies within the chemicals space
Capital Product/Process Global Cash Total
Margins Scalability
Efficiency Capabilities orientation Conversion score
PI Industries
SRF Ltd.
Vinati Organics Ltd.
Atul Ltd.
Aarti Industries Ltd.
Navin Fluorine International Ltd.
Oriental Carbon & Chemicals Ltd.
Camlin Fine Sciences Ltd.
Fair Finechem Ltd.
Omkar Speciality Chemicals Ltd.
Gujarat Fluorochemicals Ltd.
Source: Ambit Capital Note: - Strong; - Relatively Strong; - Average; - Relatively weak.
Ajay.Rao@ambit.co
Ambit Capital Pvt Ltd 16 January 2018
AMBIT INSIGHTS
Exhibit 8: Relative valuations – Vinati is now one of the most expensive names in the chemicals space
EV/EBITDA (x) P/E (x) P/B (x) ROE CAGR (FY18-20)
Name of the Company Mcap ADTV 6M
FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E Sales EBITDA PAT
(US$ mn) (US$ mn)
UPL 6,279 18.6 12.2 10.7 9.5 19.4 16.0 13.5 4.4 3.6 3.0 25% 24% 24% 12.3% 13.4% 20.1%
Bayer CropScience 2,627 1.3 35.5 28.2 23.6 47.5 38.5 32.0 8.2 7.0 6.1 17% 20% 21% 15.6% 22.6% 21.8%
PI Industries 2,156 3.4 23.4 20.1 17.4 32.2 27.6 23.9 7.0 5.8 4.8 23% 22% 22% 14.1% 16.0% 16.0%
SRF 1,748 6.5 14.2 11.1 9.6 25.2 18.5 15.8 3.2 2.8 2.4 13% 16% 17% 12.1% 21.9% 26.4%
Solar Industries India 1,665 0.6 26.4 21.5 16.8 45.2 36.1 28.1 9.5 4.7 3.6 22% 23% 24% 24.8% 25.4% 26.8%
BASF India 1,527 1.3 25.7 19.3 18.0 83.4 42.9 27.5 7.9 6.7 5.9 10% 16% 19% 9.7% 19.5% 74.2%
Aarti Industries 1,455 1.0 16.0 12.8 10.6 28.6 21.3 17.5 6.9 5.6 5.0 22% 24% 23% 15.5% 22.9% 28.0%
Atul 1,383 1.0 17.0 13.1 11.4 28.4 21.0 17.9 3.9 3.3 2.8 14% 17% 17% 10.2% 22.3% 26.0%
Himadri Specialty Chemical 1,267 5.4 24.9 18.1 14.5 41.0 29.9 20.5 6.6 5.4 4.2 18% 19% 22% 19.5% 30.8% 41.4%
Rallis India 824 2.3 17.2 14.7 12.4 27.4 22.5 19.1 4.2 3.7 3.3 16% 17% 18% 13.4% 17.7% 19.5%
Vinati Organics 771 0.4 20.2 15.7 11.0 31.2 23.4 18.8 6.0 4.9 3.6 19% 21% 24% 28.3% 35.7% 29.0%
Monsanto India 706 0.4 24.2 20.1 18.9 27.1 22.4 19.1 7.7 6.6 NA 30% 30% 32% 11.2% 13.3% 19.3%
Navin Fluorine International 637 0.8 18.3 15.8 13.6 26.0 22.1 19.2 4.5 3.9 3.5 18% 18% 18% 13.5% 16.0% 16.6%
Sharda Cropchem 658 0.2 13.2 10.2 NA 22.0 17.5 NA NA NA NA 19% 20% NA NA NA NA
Dhanuka Agritech 613 0.3 21.3 17.7 15.5 29.8 25.9 22.4 6.2 5.4 4.6 23% 22% 22% 13.7% 17.2% 15.3%
NOCIL 546 4.6 15.6 14.3 NA 26.5 24.2 NA 4.1 3.3 NA 18% 17% NA NA NA NA
Meghmani Organics 482 7.1 9.7 8.2 7.7 22.8 18.6 16.9 3.6 3.0 2.7 17% 18% 17% 10.4% 12.1% 16.2%
Sudarshan Chemical 486 0.9 15.8 12.8 11.9 30.9 23.4 20.9 6.9 5.8 NA 23% 26% 24% 10.1% 15.0% 21.7%
Insecticides India 268 1.0 11.9 10.1 8.1 19.5 16.4 13.3 3.2 2.7 2.3 17% 19% 19% 14.5% 21.8% 21.2%
Ajay.Rao@ambit.co
Ambit Capital Pvt Ltd 16 January 2018