NOT A RECOMMENDATION
Vishnu Chemical Results Update
CMP - 616
Revenue at *197cr* vs 150cr yoy
EBITA *26.5cr* vs 17.7cr yoy
EBITA margin *13.6*% vs 11.8% yoy
PBT at *16.3cr* vs 7cr yoy and 13.5 cr qoq.
(Remarkable improvement in PBT even on *qoq* in spite of sever corona second wave.)
PAT of *11.6* vs 12.5cr yoy due to tax credit in Q1FY21.
Company reported EPS of *9.7* in q1.
*Key Highlights of Press Note*
- Backward integration facility( instead of releasing carbon in the air it will be recovered and critical raw material will be produced) trial run will be completed in Q3 and will be *operationalised from Q4*. This will help to reduce the raw material cost substantially and *improve EBITA margins.*
- Barium capacity expansion from *36,000 to 50,000 MT will be *operationalised from Q4*.
- Company is facing *freight & containers issue* affecting the export.
- 52% of sales is exported to over *55* countries
- Company has partially shifted the *responsibility of freight to customers* due to which substantial reduction of selling and admin expense was witnessed
*Our Views*
- *Finance cost down* to 5.85cr vs 6.88cr yoy which will help them to bring their finance cost to 20cr for the entire year.
- Barium is consistently showing *PBT margins of 18.5%* which indicates the specialised chemical nature of barium derivatives. Capacity of Barium is increasing by 50% from q4 which will increase the blended margin.
- Backward Integrations will help them to increase their EBITA margins substantially from q4.
- Globally there are only 5 to 6 players in chromium compound manufacturing. Once backward integration is completed no other competitor will be able to match their cost of production which will give them competitive advantage over others.
From all the above rationale if we annualised q1 EPS (which was impacted by covid) and considering the impact of backward integration and expansion of barium, company can easily achieve *EPS in the range of 50 to 55*and ROE above 25%*
Considering the speciality nature of chromium and barium derivatives, company can be conservatively valued at *20PE* where other speciality companies are valued at 30 to 40 PE. This indicates a price *target of ₹1000 to 1100* within a year implying 65% appreciation.