Multibagger Recommendation Bodal Chemicals Generated 100% Return! What’s Next?
Bodal Chemicals was recommended to our paid members on 16th April 2016 at around Rs 80 with a target price of Rs 110 by the end of Aug16, mainly due to the shutdown of Chinese plant due to environmental issues. Further, we had revised our target price in Sep16 to Rs 180 as Bodal Chemical was increasing its dyestuffs capacity by 8000 MTPA and was also adding several value-added high margin products (LABSA, liquid dyestuffs).
Let’s have a look at the rationale presented to our members at the time of recommendation.
Short Investment Rationale presented at the time of recommendation (16th April 2016)
- Sudden drastic change in product price – There is a sudden drastic change for Indian dye intermediate manufacturers. Due to the closure (environmental issues) of a leading manufacturing plant in China, the price of H-acid shot up to 900-1000 per kg (compared to 300-360 in the last year) and price of Vinyl Sulphone shot up to 250-280 per kg (compared to 160-180 in the last year). Bodal Chemicals is the leading manufacturer of H-acid in India. Both Vinyl Sulphone and H-acid contribute around 45% turnover of the company.
- Vertically integrated leading manufacturer of dye intermediates and dyestuffs – Bodal Chemicals has the widest product portfolio in India across basic chemicals, dye intermediates, and dyestuffs. They have a client base across more than 35 countries. Due to the vertical integration, Bodal Chemicals consumes the majority of dye-intermediates in-house. Further, their centrally located manufacturing facility in Ahmedabad ease the availability of the raw materials and saves logistics cost.
- Improved financials and substantial debt reduction –Due to aggressive capacity expansion in the past, Bodal Chemicals had huge debt burden and the company went into CDR (almost entire promoters holding pledged). During 2015, they successfully exited from CDR. After that, debt to equity ratio reduced from 8.78 (FY13) to below 1 within 3 years. As on September 2015 debt to equity ratio stands at 0.8. With huge debt reduction, pledged shares will also remove gradually over the next 1 year. Along with speedy debt reduction, bottomline and topline growth are also impressive over the last 2 quarters. The similar trend is expected to continue with lower interest outgo and higher capacity utilization. (excluding Chinese factor)
(The above is a short investment rationale that was shared on 16th April 2016. Full write-up is visible to the Paid Members under “Members Zone”)
100%+ return already achieved- What’s next?
In spite of 100% return over the last one year, the stock has still more stem left. Capacity expansion, softening crude oil price, leadership shift from China to India supports well for the stock. We are expecting that the company would continue its good performance in FY18 too. Although another 100% return within one year from the current level (Rs.160) may not be possible. However, another 30%+ return from the current level is feasible.
Looking for similar recommendations like Bodal Chemicals?
We at Paul Asset follow a thoroughly professional approach in our stock picking and recommendation. Due diligence is carried out before recommending any stock so that our clients can gain maximum from our services. Apart from Bodal Chemical, many of our past recommendations which have generated multi-bagger returns are Future Enterprises, Century Ply, Dhanuka Agritech, Swaraj Engines, Yes Bank, Can Fin Homes, Caplin Point Lab, Ajanta Pharma, Suprajit Engineering, Atul Auto, Mayur Uniquoters, Torrent Pharma etc. The best among all was Can Fin Homes which was recommended around Rs. 150 during 2013 and now in June 2017 the price is hovering around Rs. 3200. (pre-split price) Inspite of multiple “repeat buy” and “partial profit booking” we are still holding Can Fin Homes for the long term!
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