Meghmani Organics Limited

Date:18th June 2016

Current Market Price = 40.45

Market Cap = 1028 Crore
52Week H/L=46.70/15.35
Stock P/E= 12.46

OVERVIEW
Meghmani Organics Ltd. (MOL), a part of the Meghmani group and well diversified chemical company (pigments, agrochemical and basic chemical) is entering into new growth orbit post mega capex cycle (FY11-15). With capacity
expansion company is entereing into in high margin Caustic Soda business, focus on branded agro formulation
business and scaling up the distribution network in agri concentrated areas in India (17 States). Its pan India and
international presence (75 Countries) through extensive network along with marquee clienteles (400+ customers)
would help to deliver strong financial performance. Furthermore, better capacity utilisation (post relocation of plant),
healthy product portfolio (global product registration at various stages) and strengthening position in basic chemical
(high margin) business coupled with de-leveraging balance-sheet would accelerate earning pace.
Segmental Breakdown of Revenue

31%

35%

33%

Breakdown of Revenue by Geography

Pigment
Agrochemical
Basic
Chemical

Investment Rationale

Higher utilization to augur growth for pigments:

The global size of pig-ment industry is estimated at US$
5bn, which is expected to grow at CAGR of ~4-5% during
FY15-18.Company had commenced manufacturing of
pigment since 1986 and since then it has ventured into
all value chains of pigments (CPC blue, Pigment blue,
Pigment green etc). For the same rea-son it enjoys a
market share of 7% in the global pigment industry. The
key driver for the segment would be ramping up the
plant utilization by 10% every year till FY18, which
hovered at around 50% in FY15. This will be driven by
improvement in the utiliza-tion at the Dahej plant (~35%
of total pigment capacity) as the plant was under capex
mode during last 3 yrs. Hence the company could not
garner large utilization in the past (20% in FY15). Apart
from this, management also expects to start CRAMS
business for pigment, for which it plans to tie up with a
Japanese company. This would entail company to tap
Japanese market in the future.

New capacity on stream; Benefit to accrue in FY17:

During April 2016, the company has commissioned its
new Caustic Potash facility in Dahej (21,000MT; high
margin) and also expanded its distribution network
(agrochemical segment). The pick-up in capacity
utilization, focus on branded formulation business and
stable raw materials prices (less than 50% raw materials
linked to crude oil) would keep the revenue and margin

54%

46%

India
Rest of the
World

profile at sustainable level.

Basic Chemical a growth engine to improve
revenues and sustain margins With the anticipation
of better monsoon, strong product portfolio, company is
likely to witness healthy volume growth in agrochemical
business while basic chemical segment would act as a
key catalyst due to recently commissioned plant (better
realization and high margins).
Improving liquidity position: The continuous effort of
deleveraging balance-sheet (repaid debt of Rs500 mn;
current D/E 0.98x v/s 1.23x in FY15) and improving
working capital (no major capex in all three segments),
the company is well poised to deliver earnings which
would give further cushion to retire the debt gradually.