Equity Research Report - Yasho Industries Limited

Summary

Leading specialty and performance chemicals manufacturer

YASHO INDUSTRIES LIMITED

CMP:1811/-    Target: 2433/-

KEY STOCK STATISTICS:

Market Capitalization (crs): 2,061 /-

Book Value: Rs.221 /-

Face Value: Rs. 10/-

52 week High/Low:  1905/1172

P/E Ratio: 32.60

Industry P/E: 37.81

P/BV: 8.19

Dividend Yield: 0.03/-

Source: www.sharescart.com  

Company Background:

ü  Yasho Industries Ltd is a manufacturer of specialty chemicals, food antioxidants, aroma chemicals, rubber accelerators and lubricant additives. It has a wide geographical presence with exports to Europe, America, Middle East and Asia

ü  The company manufactures a variety of chemicals that are broadly classified as food antioxidants, rubber accelerators, lubricant additives, aroma chemicals and speciality chemicals

ü  The company's chemicals are used in manufacturing of tyres, conveyor belts, personal care products, edible oils, fragrances, animal feeds, etc

ü  The company serves 1,000+ clients across 50+ countries. It exports to countries such as USA, United Kingdom, Iran, Australia, South Africa, Singapore, Germany, UAE and others.

ü  The company's marquee clients includes Dabur, Continental, Hindustan Petroleum, Balmer Lawrie, Indian Oil, Apollo Tyres, CEAT, adani wilmar, Keva, Kemin, JK Tyre, MRF, and others.

Shareholding Pattern(%):

Source: Company, KFO Research

Returns(%):

Source: Company, KFO Research

INDIAN SPECIALTY CHEMICALS INDUSTRY:

Market size of Chemicals & Petrochemicals sector in India is worth ~$178 Bn Chemicals industry in India is highly diversified, covering more than 80,000 commercial products. It is broadly classified into Bulk chemicals, Specialty chemicals, Agrochemicals, Petrochemicals, Polymers and Fertilisers. India’s proximity to the Middle East, the world’s source of petrochemicals feedstock, makes for economies of scale. India is a strong global dye supplier, accounting for approximately 16% of the world production of dyestuff and dye intermediates. Chemicals industry in India has been de-licensed except for few hazardous chemicals. Upcoming Petroleum, Chemicals and Petrochemicals Investment Regions (PCPIRs) and Plastic parks will provide state-of-theart infrastructure for Chemicals and Petrochemicals sector. The Chemicals and Petrochemicals market is projected to reach $300 Bn by 2025. FDI in Chemicals sector (excluding fertilisers) is $20.96 Bn (April 2000 to December 2022).

India ranks 11th in the World Exports of Chemicals (excluding pharmaceutical products) and ranks 6th in the World Imports of Chemicals (excluding pharmaceutical products).

Demand for chemical products is expected to grow at approximately 9% p.a. during 2020-25. Indian chemical industry employs more than 2 Mn people. Fertilisers production (weight: 2.63%) increased by 5.4% in October 2022 over October 2021. Its cumulative index increased by 10.5% during April to October 2022-23 over the corresponding period of previous year. 100% FDI is allowed under the automatic route in the chemicals sector.

Source: Company Report , KFO Research

FUTURE OUTLOOK:

The Indian specialty chemicals market is growing at almost twice the global average. Further, India’s large population base with lower per-capita consumption of chemicals and relatively strong GDP growth outlook suggests a vast untapped potential. Being an established supplier of specialty chemicals to leading players from various industries, your Company is well-positioned to take advantage of this growth.

The Indian specialty chemicals industry continues to enjoy advantages in terms of highly skilled talent and low labour costs.

Source: Company Report , KFO Research

business highlights & Analysis:

PROS

• Company has delivered good profit growth of 51.8% CAGR over last 5 years
• Company has a good return on equity (ROE) track record: 3 Years ROE 34.6%

CONS

• Stock is trading at 8.29 times its book value
• Company might be capitalizing the interest cost

Growth Drivers:

ü  The Co has acquired 42-acre land at Pakhajan village at Dahej for greenfield capacity expansion to be taken in phases. The Co intends to manufacture rubber chemicals and lubricant additives and add around 15,500 MTPA in Phase I. Following this expansion, the total capacity of the Company will stand at 26,500 MTPA. Total expenditure is pegged at 350 crores with expected commercialization within 24 months of receiving all the clearances.

ü  As the company is in specialty chemicals business, its R&D team is a primary contributor to the company's growth and success. The company has significantly increased its R&D expenses over years. It undertakes R&D activities from its own R&D facility which is DSIR certified.

ü  The upcoming new facility in Pakhajan Dahej with a  capacity of 17,500 MT strategically focused on the production of Lubricant & rubber chemicals.

ü  Several Projects are in various stages of development & we are confident that this will help us to achieve our future growth.

ü  The ‘Make in India’ initiative will facilitate the industry with common infrastructure and a consequent rapid flow of FDI into the sector which will accelerate growth.

Source: Company Report, KFO Research 

VALUATIONS:

ü  On the basis of EPS Multiple Method, we are recommending ‘Buy’ for the stock. Since the stock offers good opportunity, we initiate a ‘BUY’ signal on the stock with 12-month price target of Rs 2433/- share an upside of 34.35 % from current levels.

PEER COMPARISON: 

source: www.sharescart.com

BALANCE SHEET (RS. IN CRS):

CASH FLOW STATEMENT (RS. IN CRS):

PROFIT AND LOSS ACCOUNT (RS. IN CRS):

source: www.sharescart.com