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Thursday, 9 November 2017


Himadri Speciality Chemical Ltd, largest coal tar pitch manufacturer in India, reported spectacular second quarter numbers on the back of strong revenue growth. Revenue or Income From Operations  rose 22% YOY and stood at Rs. 4680 Mn compared to Rs. 3823 Mn in the corresponding September quarter previous year.  EBDITA was reported at Rs. 1045 Mn compared to Rs. 576 Mn rising 82% or 1.8 times on yearly basis. Profit After Tax multiplied 3 times YOY from Rs. 190 Mn to Rs. 512 Mn in the current September quarter. Operating Expenditure jumped 12% YOY from Rs. 3266 Mn to Rs. 3654 Mn in the current Q2 FY18. On sequential basis, operating expenditure declined 9%. As a result EBDITA margin jumped phenomenally by 728 basis points YOY and 213 basis points sequentially. One basis point is 0.01%. Net Profit Margin followed suit rising 595 basis points YOY and 98 basis points on quarterly basis. Though Depreciation expenditure is stable at around Rs. 79 Mn, interest expenditure constituting 40% of the total PAT or net profit is a concern area. Interest expense was reported at Rs. 208 Mn against Rs. 188 Mn same period previous year, rising 10% YOY. Taxation too has jumped 139% YOY at Rs. 246 Mn in Q2 FY18. Himadari Chemicals has maintained its profitability momentum through higher revenue growth and controlled operating cost structure. The company has also rationalized its debt and repaid about Rs. 400 Mn over the previous 4 years. Himadari Chemicals has lined up huge capex plans to set up a manufacturing facility of Advance Carbon Material in West Bengal with annual capacity of 20,000 MT and also new line of carbon black with additional annual capacity of 30,000 MT. The total cost of combined capacity expansion would be around Rs. 6280 Mn.

Himadari Chemicals Ltd, is the largest coal tar pitch manufacturer in India. The company is a carbon specialist developing coal tar by-products and addressing needs of growing industries such as aluminium, graphite, infrastructure, lithium ion batteries and Tyre. About 98% of its revenues come from carbon material & chemicals segment which have risen 23% YOY. Carbon revenues stood at Rs. 4626 Mn against Rs. 3766 Mn corresponding period previous year. The other segment, Power contributed just 2% in the current quarter and was almost stagnant at Rs. 105 Mn. Strong capex plans, specialized core product profile and high growth opportunities in sunrise industry such as lithium-ion battery will lead to strong and sustainable growth for the company in the long run. We recommend BUY for the medium & long term with target price of Rs. 252. 

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