Paushak Ltd :- niche player in speciality chemical – Dialwealth

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Name :-Paushak LTD(alembic group co.)

Current Market Price: 260-2700 (3rd July, 2020)

*Had recommended to clients on 3rd July 2020 at Rs 2600 & it is one off our high conviction picks as of now*

First Target: 5000

Listed on BSE (532742)

Market Capitalization: Rs. 800 cr

Promoter Holding: 67%

Conviction: Very High

paushak ltd is a Alembic group company,company has Strong Balance Sheet, Very,high margins, capacity expansion & has a monopoly product.

Once the expanded capacity comes in play import substitution will help Paushak to
scale up in big way.

Paushak limited is engaged in the manufacturing of phosgene based specialty intermediates and is India’s largest phosgene based specialty chemicals manufacturer while addressing the needs
of pharmaceutical, agrochemical & performance industries.

➢ Company has 4 decades of experience of handling modalities of phosgene gas. Phosgene is a versatile molecule and its derivatives have applications in diverse fields like pharmaceuticals,agrochemicals, polyurethanes, perfumeries, dyes etc

➢ The product range of the company includes: Isocyanates, Chloroformates, Carbamoyl Chlorides,Carbamates, Protecting agents & Acid chlorides.

➢ paushak has become 56th company in India to receive permission to use “Responsible Care”logo (RC) from Indian Chemical Council (ICC), the nodal agency in India. Company has achieved this after going through an extensive audit from ICC.

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➢ Paushak is among one of the smallest companies (in terms of turnover) to receive the same where majority of the companies having permission to use the RC logo in India are big players/MNCs.

➢ This has further enhanced and substantiated companies capabilities of running sustainable operations while handling hazardous chemicals and generating greater value for businesses.

Capacity expansion :-

➢ Paushak is currently spending Rs 120 crore in expanding its capacity by 300%

➢ Company has kept their focus on core competency i.e. phosgene based speciality chemicals and

➢ Currently, Paushak is in process of expanding its capacity by 3 times i.e. from 400 MT/month to 1200 MT/month. As per Crisil Credit Rating report dated 17.02.2020, required capex of Rs. 120 Crores is expected to be largely funded with internal accrual and surplus cash.

➢ Phosgene being a hazardous gas is heavily regulated by government. Getting approval for manufacturing unit or expansion of already existing unit is not easy and is time consuming process which may take 3-4 years. The company is one of the few players licenced to manufacture
phosgene gas. As per annual reports, they have been handling phosgene safely for last 4 decades.

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This shows that company has limited competition from Indian players.

➢ We @Dialwealth expect company to start its new plant within next 6 months and once the plant starts operating company is expected to post exponential growth for next 5-6 quarters.

➢ In this years annual report management also mentions that exploring various opportunities,including contract manufacturing, with global customers and pleased to share that your Company
has been able to initiate business with one of the global agro majors and expect to develop the relation further while increasing the product & service offerings.

For the current year we @Dialwealth Paushak to post topline of 160-170 cr and Pat of 40-45 crores so at current market price stock is trading at 20 times current year earnings

➢ However once the capacity comes online in current year which will be 3times the
current capacity one can expect big jump in topline and bottomline from next year

➢ For FY22 on very conservative estimate topline could be more than 300 cr & pat
could well be around 100 cr mark and for FY23 this figures can surprise everybody.

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➢ Paushak has maintained EBIDTA margins of 28-30% for 3 years in a row which
shows the pricing power it has for its products despite competition from imports
from china.

➢ Company has all the ingridients in place to give multibagger returs to its shareholders in times to come.

➢ If you have any doubt regarding our stock picks feel free to contact us we will be
available 24×7.

I am not a sebi registered research analyst if always consult your financial advisor before investing

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Jimit Shah

Jimit Shah

Prefers growth vs value | Can’t understand complex balance sheet
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