Camphor & Allied Products Ltd - Re-rating Candidate

The Ace Investor

Camphor & Allied Products Ltd

  Listed on BSE: 500078
Currently trading around 400 with a market cap of around 200 crores.

Promoters hold 57.66% stake
Total Debt is around 100 crores, Total Reserves around 128 crores.

Interest coverage ratio is more than 4.

Camphor & Allied Products Ltd (CAPL) is an Indian specialty chemical company, It is the largest exporter of specialty aroma chemicals which finds application in a wide range of products including deo & perfumes, cosmetics, fabric care products and other personal care products.

Fragrance chemical portfolio of the company includes: Astromeran, Astrone, Astrolide, Capinone, Dihydroterpineol, Dihydroterpinyl Acetate, Fenchone, Isoborneol, Isobornyl Acetate, Ketone 101, Terpineol, Terpinyl Acetate, Citwanene, Isolongifolene, Longifolene, Camphor.

CAPL is having two manufacturing units at Bareily U.P and Vadodara, Gujarat.

CAPL is in a tie-up with Agan Aroma & Fine Chemicals, a subsidy of Makhteshim Agan which itself is now controlled by Chem China which is the largest Chemicals company in China.

Products manufactured at CAPL vadodara plant is marketed by Agan worldwide and Agan is also providing technology assistance to CAPL.

CAPL is now promoted by India's largest fragrance manufacturer Oriental Aromatics Limited, It took over the company by acquiring stake at Rs 167 per share.

 Lets take a look at Camphor's financial snapshot since 2005

As you can see CAPL has grown well from FY05 to FY12, Sales of 74 crores have now increased to 355+ crores.

CAPL is trading only at 200 crore market cap with sales at 355+ crores. 

CAPL has an EPS of around 37, And in the coming quarters with the raw-material costs around its lows, CAPL should easily expand their net profit this FY and report better numbers.

Tie-up with Chem China somewhat hedges the China threat that specialty chemical companies otherwise face.

The total share capital of the company is only 51,33,674 and the promoter holds 57.66% stake which means only about 21 lac shares are available in the market.

Though there are no Public shareholders holding more than 1%, The annual report reveals the top shareholders to be Hirji Eddie Nagarwalla who held 0.87% at end of FY15 and another major shareholder is Keva Constructions Private Limited which holds 0.96% stake in Camphor (CAPL).

A little use of Google will show that Keva Constructions is a subsidiary of S H Kelkar which is a direct peer to Camphor & Allied Products Ltd and a fragrance manufacturer. 

Recently, the IPO of Indigo Airlines (Interglobe Aviation) triggered Spicejet to rally more than 60% in few days just because Indigo was commanding good valuation, However Spicejet at large has been in financial trouble and it was given clearance to fly only recently and there is not much clarity on how long it will remain profitable.

The major trigger for re-rating in CAPL is the IPO of fragrance and aroma chemical manufacturer S H Kelkar which opens on 28th October 2015.

CAPL with annual EPS of around 37 and current market price of 400 is trading at just under 11 P/E with a good track record and good management.

 While S H Kelkar with an annual EPS of 4.13 is coming out with an issue price of 170 valued at 41 times to its FY15 EPS.

At present, CAPL is trading at 11 P/E, If we apply the 41 P/E that S H Kelkar should be getting with their IPO the share price of CAPL should be at 1500+.

All in all, Looking at the issue price of S H Kelkar it is obvious that Camphor & Allied Products Ltd deserves major re-rating and is a value pick at current levels of around 400 trading at 11 P/E and having MCAP/Sales ratio at only 0.56.

Note: The above is not a research report but information as available on public domain and it should not be treated as a research report.

Registration status with SEBI: I am not registered with SEBI under the (Research Analyst) regulations 2014 and as per clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations”

Disclosure: It is safe to assume that i might have Camphor & Allied Products Ltd in my portfolio and hence my point of view can be biased. Readers should consult their financial advisory before any investments.

:Links:

Camphor Website

Camphor Screener

Camphor Annual Report 2015

S H Kelkar IPO news

S H Kelkar IPO documents