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com
This is not a buy or sell recommendation. We are in the process of compiling data
sheets of companies that we track / own so that in future we may use these for buying /
selling stocks of such companies. Reason for sharing is hopefully somebody who has
more information / insight may get in touch with us or for a healthy debate.



Punjab Chemicals & Crop Protection Ltd

Date : 10-Jun-14
Traded In : BSE B (506618)
Face Value : 10
CMP : Rs 79
EPS (TTM) : 0.78
P/E : 101
Market Cap : 85 Cr
Enterprise Value : Rs 377 Cr
52 Week H/L : 86.4 / 29.15
Website : http://www.punjabchemicals.com/

The base report & update are available at
www.scribd.com/doc/216086492/Punjab-Chemicals-Apr-2014

www.scribd.com/doc/226327682/PCCPL-May-2014-Update

The q4 results of PCCPL are out and at the first look it disappoints. After 2 qtrs of profit,
the company was in the red again. Looking at the results in depth, it shows a lot of
promise (at least for me)



2014 Profit in spite of Rs 34 Cr finance costs, Rs 3 Cr VRS settlement, Rs 4 Cr Share of
loss of associates for previous years
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The above results of Subsidiaries are very roughly calculated by subtracting the stand
alone results from the consolidated. The idea is to get a rough estimate of how the
company is faring. One of the main worries of PCCPLs turnaround was the bleeding of
the subsidiaries. It is now evident that they have managed to plug that. It is seen they
have reduced the concentration of overseas sales.

Also PCCPL has reduced its interest cost compared to last 3 4 years.
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The quarterly result was definitely not good. Sales were down. An onetime VRS
settlement further dragged its losses. We hope this is just a blip in an otherwise positive
turnaround.




The pharma division has done well considering the fact that it has been neglected in
terms of capex. We feel either a de merger or stake sale could take place because of the
lack of capex. If the management feels otherwise and pumps in some money into
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pharma, it could deliver good results. Either way we feel the pharma division will be a
feather in the cap.

Debt Management





The debt of the company is the main reason for the companys poor performance. If you
analyze the above tables, it is clearly seen that the management is working towards
resolving the debt issue. The overall debt is still high but compared to the previous
years it has reduced. The finance costs have also come down.

An interesting point to note is that the ST debt of subsidiaries has become nil but the LT
debt of the subsidiaries is nearly Rs 41 Crs. Hopefully the management will be more
careful with the debt of the subsidiaries

Debtor days

Selling a product is one thing but getting the payment for is a totally different world. The
speed at which the payment comes after the sale denotes the importance of the product
to the customer. In the corporate world 60 90 days are the norm for the payment to be
settled.





The improving Debtor days numbers increases the confidence that the scompany is
scripting a turnaround



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Reward ?

We understand that debt is a major risk of PCCPL but in case the company mitigates
that risk, what would the reward or rather the magnitude of the reward be?



Data of 10-Jun-14

Looking at the data of some agro chemical companies, we see that with decent sales
and profits they are richly valued.

PCCPL has the sufficient sales to be in their league, it is only the profit department that
is lacking. Even here 2014 Profit was in spite of Rs 34 Cr finance costs, Rs 3 Cr VRS
settlement, Rs 4 Cr Share of loss of associates for previous years. We feel debt would
be better managed with the sales of the Mumbai office building and the sale / lease of
Industrial Chemical division (Pune).

We are not thinking in a linear fashion of assuming an Rs 20 Cr net profit would net a Rs
300 Cr market cap. We are just saying if PCCPL gets an Rs 20 Cr net profit in the next 1
or 2 years, its market cap will be re rated.

Cash Equivalent

PCCPL has Cash Equiv of Rs Cr 28.87 (last year Rs Cr14.46) and other current assets
Of Rs Cr 17.85 (Rs Cr 3.80)

Synopsis

An article in ET June 10
th
2014 talks about how companies getting out of debt traps can
become multibaggers. This is the main backbone of our reasoning for PCCPL.

References

1. www.bseindia.com
2. www.punjabchemicals.com
3. http://economictimes.indiatimes.com/markets/analysis/top-ten-stocks-to-watch-out-
which-are-coming-out-of-debt-trap/articleshow/36335995.cms



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Disclaimer

General: This report is not a buy / sell recommendation. Buying stocks must be done
after careful analysis and the above report can be used as a base for the analysis and
should not be used as sole basis.

Vested Interest: The author does have position in the above stock @ average price of
Rs 74. He may purchase / sell the same in the future in the short or long term based on
his conviction and his financial situation.

Data Validity: The data is collated from various sites in the internet. Even though we
have tried our best, there may be discrepancy due to human error while collating the
data. The author should not be held responsible for such mistakes. The data can be
looked up at various websites given in the reference section.

Valuation: The author is not an expert and his valuation may be off the mark.