Camlin Fine Chem

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Stock DataSector Specialty Chemicals

Face Value Rs. 10.00

52 wk. High/Low (Rs.) 137.00/42.00

Volume (2 wk. Avg.) 7669

BSE Code 532834

Market Cap (Rs.In mn) 726.8

Financials(Rs.in.mn) FY10 FY11E FY12E

Net Sales 1252.2 1477.6 1654.9EBIDTA 147.5 186.4 204.4

PAT 42.8 49.5 57.8

EPS 7.37 8.52 9.94

P/E 16.96 14.68 12.57

Camlin Fine Chemicals Ltd BUYF

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SYNOPSIS

We initiated coverage of Camlin FineChemicals Ltd and set a target price of

Rs.144.00 for medium term.

Camlin Fine Chemicals is the world'ssecond largest manufacturer and marketer

of food grade antioxidants TBHQ and BHA.

During the quarter, the company hasapproved the increase of borrowing limit.

Camlin Fine chemicals are proposed a rightissue of equity shares to the existing

shareholders of the company.

During the year ended, the robust growth ofrevenue is increased by 24% Rs.1252.20

million.

The top line and bottom line of the companyare expected to grow at a CAGR of 18% and

20% over 2009 to 2012E respectively.

1 Year Comparative Graph

Camlin Fine Chemicals Ltd BSE SENSEX

V.S.R. Sastry

Equity Research [email protected]

Dr. V.V.L.N. Sastry Ph.D.

Chief Research Officer

[email protected]

C.M.P: Target Price:Rs.125.00 Rs.144.00

Share Holding Pattern

July 14, 2010


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Peer Group Comparison

Name of the company CMP(Rs.)Market

Cap.(Rs.Mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%

Camlin Fine Chemicals 125.00 726.8 7.37 16.96 2.18 20.00

Chembond Chemicals 182.00 1157.6 8.10 22.47 4.67 35.00

DIC India Ltd 310.00 2845.5 32.02 9.68 1.43 35.00

Keltech Energies Ltd 274.00 274.0 59.00 4.64 1.48 25.00

Investment Highlights

Q4 FY10 Results Update

Camlin Fine Chemicals reported a steep zoom in standalone net profit for the

quarter ended March 2010. During the quarter, the profit of the company surged

by 37.78% to Rs.11.27 million from Rs.8.18 million in the same quarter previous

year. Net sales for the quarter for the quarter rose 13.95% to Rs.365.79 million,

while total income for the quarter rose 14.94% to Rs.370.33 million, when

compared with the prior year period. It posted earnings of Rs.1.94 a share during

the quarter, registering 37.42% surged over previous year period.

Quarterly Results - standalone (Rs in mn)

As At Mar-10 Mar-09 %change

Net sales 365.79 321.00 13.95

PAT 11.27 8.18 37.78

Basic EPS 1.94 1.41 37.42


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Break up of Expenditure

FY10 Performance

The company has posted a net profit of Rs.42.86 million for the year ended March

31, 2010 as compared to Rs.33.85 million for the year ended March 31, 2009. Net

sales for the year ended is rose 24% to Rs.1252.20 million, while total income for

the quarter rose 25% to Rs.1263.39 million, when compared with the prior yearperiod.

Right issue

Camlin Fine chemicals are proposed a right issue of equity shares to the existing

shareholders of the company. The ratio of the rights entitlement is 3:5 (i.e, three

equity shares for every five shares held). The issue price per equity share is

Rs.15.75


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Recommendation of dividend

Camlin Fine Chemicals has recommended a dividend of Rs. 2.00 per Equity Share

of Rs. 10/- each for the year 2009-2010. And also has approved the increase of

borrowing limit.

Allotment of shares

Camlin Fine Chemicals Ltd has allotted 3190 Equity Shares of Rs. 10/- each to

employees who have exercised their options to apply for equity shares at an

exercise price of Rs. 50/- per share under the 'Camlin Fine Chemicals Employees'

Stock Option Scheme, 2008' (ESOP 2008) of the Company.

Company Profile

Camlin, the corporate group, was established in 1931 and is a pioneer in art and

stationery material in India. Camlin diversified into Pharmaceuticals and Fine

Chemicals two decades ago. The Fine Chemical Division of Camlin got de-merged into

a separate company named as Camlin Fine Chemicals on 22nd December 2006. The

entire management team and employees of Camlin Fine Chemicals Division are now apart of the independent legal entity formed under the Indian Companies Act 1956

Camlin Fine Chemicals is the world's second largest manufacturer and marketer of

food grade antioxidants TBHQ and BHA. Its mission is to be the largest food

antioxidant and ingredient manufacturer worldwide. Their facilities are HACCP and

ISO 9001: 2000 certified.


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Product Range:

a) Food Ingredients

Antox TBHQ (HACCP Certified) FCC V / FAO / WHO (Tertiary Butyl Hydroquinone)

Antox BHA (HACCP Certified) FCC V / FAO / WHO / EEC ( Butyl Hydroxy Anisole)

b) Sweetener -

Sucralose FCC V

c) Active Pharmaceutical Ingredients -

Miconazole Nitrate B.P. / USP Clotrimazole B.P. / USP Amlodipine Besilate E.P Amlodipine Salts Advance intermediate of Amlodipine Intermediate of Miconazole Nitrate

d) Super Absorbent Polymer

Subsidiary Details:

Chemolutions Chemicals: Specialty Chemical Intermediates Sangam Laboratories: Nutraceuticals Fine Renewable Energy. Fine LifeStyle Brands: Luxury Fashion Brands


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Financials Results

12 Months Ended Profit & Loss Account (Standalone)

Value(Rs.in.mn) FY09 FY10 FY11E FY12E

Description 12m 12m 12m 12m

Net Sales 1006.45 1252.20 1477.60 1654.91

Other Income 4.29 11.19 12.09 13.29

Total Income 1010.74 1263.39 1489.68 1668.20

Expenditure -863.23 -1115.89 -1303.24 -1463.77

Operating Profit 147.51 147.50 186.44 204.44

Interest -55.35 -60.38 -63.40 -66.57

Gross profit 92.16 87.12 123.04 137.87

Deprecation -40.11 -44.26 -49.13 -51.59

Profit Before Tax 52.05 42.86 73.91 86.28

Tax -18.20 0.00 -24.39 -28.47

Profit After Tax 33.85 42.86 49.52 57.81

Equity capital 58.00 58.15 58.15 58.15

Reserves 236.35 274.93 324.45 382.26

Face value 10.00 10.00 10.00 10.00

EPS 5.84 7.37 8.52 9.94


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Quarterly Ended Profit & Loss Account (Standalone)

Value(Rs.in.mn) 30-Sep-09 31-Dec-09 31-Mar-10 30-Jun-10E

Description 3m 3m 3m 3m

Net sales 296.29 333.15 365.79 347.50

Other income 1.19 4.49 4.54 4.90

Total Income 297.48 337.64 370.33 352.40

Expenditure -250.68 -298.60 -331.96 -298.85

Operating profit 46.80 39.04 38.37 53.55

Interest -16.69 -14.13 -14.60 -13.87

Gross profit 30.11 24.91 23.77 39.68

Deprecation -9.26 -10.79 -12.61 -13.74

Profit Before Tax 20.85 14.12 11.16 25.94

Tax -6.80 -9.64 0.11 -8.82

Profit After Tax 14.05 4.48 11.27 17.12

Equity capital 58.00 58.06 58.15 58.15

Face value 10.00 10.00 10.00 10.00

EPS 2.42 0.77 1.94 2.94


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Key Ratios

Particulars FY09 FY10 FY11E FY12E

No. of Shares(In Million) 5.8 5.82 5.82 5.82

EBITDA Margin (%) 14.66% 11.78% 12.62% 12.35%

PBT Margin (%) 5.17% 3.42% 5.00% 5.21%

PAT Margin (%) 3.36% 3.42% 3.35% 3.49%

P/E Ratio (x) 21.42 16.96 14.68 12.57

ROE (%) 11.50% 12.87% 12.94% 13.13%

ROCE (%) 33.72% 26.03% 29.21% 28.91%

Debt Equity Ratio 0.89 1.21 1.11 1.01

EV/EBITDA (x) 4.91 4.93 3.90 3.56

Book Value (Rs.) 50.75 57.28 65.8 75.74

P/BV 2.46 2.18 1.90 1.65


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Charts:


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Outlook and Conclusion

At the current market price of Rs.125.00, the stock is trading at 14.68 x FY11E

and 12.57 x FY12E respectively.

Price to Book Value of the stock is expected to be at 1.90 x and 1.65 x

respectively for FY11E and FY12E.

Earning per share (EPS) of the company for the earnings for FY11E and FY12E

is seen at Rs.8.52 and Rs.9.94 respectively.

Net Sales and PAT of the company are expected to grow at a CAGR of 18% and

20% over 2009 to 2012E respectively.

On the basis of EV/EBITDA, the stock trades at 3.90 x for FY11E and 3.56 x for

FY12E.

We expect that the company will keep its growth story in the coming quarters

also. We recommend BUY in this particular scrip with a target price of

Rs.148.00 for Medium term investment.

Industry Overview

The Specialty Chemicals segment in the Indian Chemical Industry is a new emerging

sector which brings promises of huge growth.

Specialty chemicals are those chemicals which are produced at a low volume; they are

high priced and usually targeted at a wide variety of markets. These chemicals are

developed under the user's specifications which usually vary from one user to another.

The methods of development depend on the application and the function of the

chemicals. This industry requires the best technical know how.

The different Specialty chemicals:

Diagnostic Aids Adhesives Paper Additives


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Flavors & Fragrances Elastomers Foundry Chemicals Industrial Enzymes Cosmetic Additives Dyes Food Additives Metal Plating & Finishing Chemicals Lube Additives Category Specialty Chemicals Industrial Cleaning Agents Fuel Additives Polymer Additives Oilfield chemical Mining Chemicals Photographic Chemicals Paint Additives Construction Chemicals Rubber Chemicals Water Management Chemicals Surfactants


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Textile Auxiliaries Electronic Chemicals.

The Specialty Chemicals segment is disunited with a huge number of companies.

TNCs have a stellar inherence in this sector. Many of the present textile

manufacturers are emerging as specialty chemical developers.

Major companies in the Specialty chemicals segment:

ClariantIndia Ltd Ciba Specialty Chemicals Color Chem BASF Foseco Hindustan Organic Chemicals Balmer Lawrie

Major consumers in the Specialty chemicals segment:

Textile industry Leather industry Paper industry Detergent industry Rubber industry


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Paints industry Agro chemical industry Oil & gas industries.

Market Characteristics

The specialty chemicals segment is estimated around US $ 465 million The industry has emerged from textile auxiliary chemical industry.

Key Success Factors

Application of superb engineering skills for better chemical formulations Customization of the chemicals for specific end users requirements Technical knowhow to be imported for better production More export oriented productions Formulation of policies for the better functioning of the industry.

Future of the Specialty chemicals segment:

Focus on improvement in efficient processes for enhanced productivity India to be one of the main source of base materials The demand of the segment depends on the demand of the end users.


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________________ ____ ________________________Disclaimer:This document prepared by our research analysts does not constitute an offer or solicitation

for the purchase or sale of any financial instrument or as an official confirmation of any

transaction. The information contained herein is from publicly available data or othersources believed to be reliable but do not represent that it is accurate or complete and itshould not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of its

affiliates shall not be in any way responsible for any loss or damage that may arise to anyperson from any inadvertent error in the information contained in this report. This documentis provide for assistance only and is not intended to be and must not alone be taken as the

basis for an investment decision.


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Camlin Fine Chem

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